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OSC enforcement director Tom Atkinson (Tibor Kolley/globe and mail)
OSC enforcement director Tom Atkinson (Tibor Kolley/globe and mail)

OSC to unveil 18 new enforcement cases Add to ...

The Ontario Securities Commission is poised to unveil 18 new enforcement cases over the next six months, including some major ones involving insider trading and improper activities by foreign companies listing in Canada.

OSC enforcement director Tom Atkinson announced the anticipated case load Tuesday, saying the commission is also trying to prosecute more cases in provincial court as quasi-criminal offences.

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The commission has long faced criticisms for its poor enforcement track record, especially on major cases, but Mr. Atkinson told an OSC conference Tuesday that the regulator is becoming more efficient, launching 35 prosecutions last year compared to just 12 in 2009. He said investigations are also moving more quickly, and the commission currently has only five case files that have been open for more than two years, compared to 21 in 2009.

The OSC also expects to handle about 30 per cent of its cases in court this year, which means jail terms are a possible penalty, he said. The commission has traditionally handled most of its cases as tribunal hearings, where jail terms are not an option, because of the greater difficulties of successfully prosecuting criminal matters in court.

Boiler room stock fraud cases are especially appropriate to take to court, he added, and prosecutors are often successful when the cases involve repeat offenders who are breaching prior commission orders.

“These are what I would consider professional people who deal with fraud – people that just go out there and try to steal money from their clients,” he said.

Mr. Atkinson said the commission is currently looking into some large cases involving “semi-organized” insider trading, but did not elaborate further on the cases. He noted, however, that the OSC is getting better at finding connections between people working together on illegal insider trading.

The OSC is also tackling a number of investigations involving companies based in emerging markets and listing their shares in Canada, but the investigations are difficult to conduct in other countries, Mr. Atkinson said.

An investigation of Sino-Forest Corp., for example, has been complicated by the need to translate many documents into English. He said the OSC has sent teams to Hong Kong and Beijing, and more staff are set to go back.

“On the emerging markets front, we have a few very large cases that we’re dealing with, which we’re finding difficult to be swift,” he said.

The OSC halted trading in Sino-Forest shares in August, alleging that it appeared some senior executives had engaged in fraud. A short seller issued an explosive report on the Hong Kong-based company in June, calling it a Ponzi scheme.

OSC chairman Howard Wetston said Tuesday the regulator is conducting a broad review of rules governing emerging-market companies that list their shares in Canada to decide whether tougher regulations are needed. He said the OSC is reviewing 24 companies from different countries as part of the review.

“We are trying to determine whether these emerging market issuers, as well as those involved in bringing the issuers to market and auditing their financial statements, provided the required disclosure and conducted the required due diligence.”

He warned business advisers who help companies list in Canada – such as underwriters or lawyers – that they need to be more aware of different business practices in other countries and how they vary from standards in Canada.

And he stressed that North American due-diligence processes can prove ineffective in foreign markets since they may prove incompatible with local business and cultural practices.

Mr. Wetston told reporters he believes the OSC may need to bring together representatives from various groups involved in helping foreign companies list in Canada – including lawyers, stock exchange officials and auditors – to develop policy ideas to reform rules.

Follow on Twitter: @JMcFarlandGlobe

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