FAIR Canada has provided comments to the OSC on the proposed OSC staff enforcement initiatives. Over the past year the OSC has intensified its enforcement efforts and these efforts have produced much improved results. Major challenges remain, especially with investigation and prosecution of non-complaint emerging market listed companies. FAIR Canada is concerned that the proposed no-contest settlement program will make it more difficult for investors to recover losses and will not deter corporations and individuals from violating securities laws. FAIR Canada recommends that no-contest settlements be further restricted so that cases are only eligible for no-contest settlements either: (a) where there is no harm to investors and, therefore, no need for investors to seek compensation, or (b) where the defendant(s) will provide fair and reasonable compensation to aggrieved investors.
FAIR Canada believes that the OSC should not increase the use of Executive Director-approved Settlements (“Executive Director Settlements”) without first publically disclosing data about their use to date. We recommend that the OSC publish a report which provides information on Executive Director Settlements, including the type of Executive Director Settlements, the number of Executive Director Settlements reached each year and whether defendants have subsequently breached securities laws or acted contrary to the public interest. This will allow for greater transparency about this use of this discretion and will allow stakeholders to comment on whether such settlements should be used more sparingly, or whether greater use of such settlements would be in the public interest.
The OSC Notice sets out that it is studying the introduction of a whistleblower program which includes incentives to whistleblowers for providing information. FAIR Canada supports the introduction of a whistleblower program and urges the OSC to introduce such a program as soon as practicable in order to allow it to gain valuable information that it may not otherwise obtain and in order to aid in its mandate to protect investors and foster confidence in our capital markets. We also reiterate our recommendation that regulators consider introducing rules that require all registrants to report potential serious misconduct by other registrants.
FAIR Canada urges the Ontario Ministry of Finance to take the steps necessary to give the OSC the power to order financial compensation for aggrieved investors (thereby eliminating the need for investors to go through the courts to obtain compensation for financial loss). An increased focus on victim compensation would further the OSC’s mandate to protect investors and foster confidence in the capital markets.
Statistical information on the performance of the securities enforcement system in Canada is needed in order to provide the public with better transparency and accountability and in order that securities regulators, other enforcement agencies, and other bodies can determine more effective solutions to help enhance enforcement efforts. As a first step in providing statistical information, we urge the OSC to publish information on collection of settlement amounts, administrative penalties, and ordered disgorgement.
