OSC Chair Supports Priority Recommendations at Standing Committee of the Legislature
For Immediate Release OSC
TORONTO - Appearing at the Standing Committee on Finance and Economic Affairs at the Ontario Legislature today, Ontario Securities Commission (OSC) Chair David Brown discussed the recommendations of the Five Year Review Committee, specifically addressing the need for a single securities regulator and the question about the structure of the OSC. The Standing Committee has been mandated to review the Five Year Review Report recommendations and to present its final report to the Legislature by October 18, 2004.
"I am very pleased to have participated in consultations on the Five Year Review," said David Brown. "It is a valuable opportunity to take a look at the laws, structure and operational policies that characterize securities regulation in this province. The review process provides a proactive opportunity to take a look at a system that is working well, to determine ways in which it can be made even better."
In particular, Mr. Brown recommended that the Standing Committee give priority to four initiatives requiring legislative attention:
- The need to proclaim amendments to the Securities Act that have been enacted that would create a regime for statutory civil liability for secondary market disclosure, and add express prohibitions against fraud, market manipulation and misrepresentation.
- The need for better tools and flexibility to deal effectively with securities regulators in other Canadian jurisdictions, including statutory amendments to facilitate inter-jurisdictional delegation of decision-making.
- The need to reduce the regulatory burden and facilitate quick responses to new situations by allowing the Commission to issue blanket rulings and orders that provide exemptive relief to market participants.
- The need to catch up to changes in how commercial law deals with the transfer and pledging of securities. This is an area where Canada lags the U.S. and the European Union.
"Unlike investors in the United States, Ontario investors face significant hurdles in suing corporations and their insiders for false or misleading disclosure," Mr. Brown said. "The proposed civil remedies will both provide investors with a means to seek redress and encourage compliance by corporations and others with their obligations of transparency. The prohibitions against fraud, market manipulation and misrepresentation will enable us as regulators to seek quasi-criminal sanctions against those who would undertake that activity in our markets. We’ll get tools we need to help protect investors in this province."
In its report, the Five Year Review Committee also identified the urgent need for a single Canadian securities regulator as the most pressing securities regulation issue in Ontario and across Canada. This view was echoed in the report of the Wise Persons’ Committee, chaired by Michael Phelps, titled "It’s Time". This report, issued in December 2003, reflected the unanimous view of its members that Canada must adopt a fundamentally new structure - a single regulator administering a single securities code.
"Canada simply cannot afford the duplication and overlap of 13 securities regulators when every country Canadians compete with has a national regulator," concluded Mr. Brown. "Ours is the only advanced national economy in the world not to have a national securities regulator. We are out of step with the world."
Mr. Brown echoed the Five Year Review Committee's support for the adoption of a Uniform Securities Act to streamline capital markets regulation across Canada. "We have devoted significant resources to this important harmonization project which could form the starting point for uniform securities regulation," said Mr. Brown.
Mr. Brown also addressed the challenge faced by the legislative committee in examining the OSC's structure and the need to balance the advantages and disadvantages of different models to determine if the current structure continues to be the best to serve Ontario investors and participants in this province's capital markets. "The OSC is always prepared to embrace change in order to meet change," said Mr. Brown. "As a regulator of financial markets in a period of rapid transformation, we can do no less."
Mr. Brown tabled a number of documents with the Standing Committee, including a report on the structure of the OSC, which the OSC commissioned from a committee headed by Ontario's Integrity Commissioner Coulter Osborne. The report examined the structure of the Commission and the potential for the perception of bias and the possibility that such a perception would erode the credibility of the Commission. While the report advises the Commission to undertake structural changes that will require authorizing legislation, the report found no impediment to the Commission continuing to fulfill its adjudicative responsibilities and functions on a business-as-usual basis.
The report further pointed out that the Supreme Court of Canada has found no complaint about the apprehension of bias where organizations adopt an integrated regulatory model. Canada's highest court has recognized, in the words of Chief Justice McLachlin, "... the overlapping of investigative, prosecutorial and adjudicative functions in a single agency is frequently necessary for [an administrative agency] to effectively perform its intended role."
Copies of Mr. Brown's comments and of the documentation he tabled with the Standing Committee are available at the OSC's web site (www.osc.gov.on.ca).
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