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May 31 2012
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Bricks and Bouquets for Regulators

Bouquets go to the Ontario Securities Commission (OSC) for its focus on investor protection in its draft Statement of Priorities. FAIR Canada is supportive of the new Office of the Investor, and a number of other OSC initiatives such as: the future release of research regarding the client-advisor relationship; studying the cost of owning mutual funds in Canada; working with the Ombudsman for Banking Services and Investments (OBSI) and its CSA colleagues to support an effective informal dispute resolution process for investors; and increasing the robustness of its enforcement activities.

In response to its request for comments, we provided suggestions to the OSC about additional issues we would like to see addressed in the final Statement of Priorities. These issues include:

    • closer oversight of non-SRO member registrants and mandatory membership in a compensation fund to protect investors from insolvency of a registrant;
    • an examination of leverage, particularly in the sale of mutual funds;
    • substantive regulation of group scholarship plans;
    • appropriate management of conflicts of interest at the TSX; and
    • the need for a single national comprehensive background check that Canadians can easily use to check the background, registration status and disciplinary history of registrants

Bricks go to the CSA for letting several years go by without taking any action to address unequal access to SEDAR “public” documents. Paying subscribers to SEDAR are provided with earlier access to “public” information about public companies through SEDAR than the non-subscribing public. This allows large investors with greater resources to have nearly real-time access to public documents while the public does not gain access until the following day.

Full, true and plain timely disclosure is a cornerstone of investor protection. Permitting two levels of access to public information does not adhere to the principle of timely disclosure, as it supplies “public” information to subscribing investors for a fixed period of time to the exclusion of non-subscribers. In FAIR Canada’s view, the current public accessibility delay is unfair and clearly favours some market users over others. The CSA is responsible for SEDAR and has been aware of this problem since at least 2009, when Corebox brought it to their attention. The Canadian Investor Relations Institute also wrote to the CSA in 2011. The CSA’s response to CIRI did not indicate it would take any immediate steps to address the issue. The CSA will be replacing SEDAR in the next few years and indicated it is “…also exploring options for an interim solution to improve the timeliness of access to SEDAR filings”.  Filing disclosures should be made available to all investors simultaneously.

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