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Howard Wetston, the chairman of the Ontario Securities Commission, photographed at the commission offices in Toronto. (Fernando Morales/Fernando Morales/The Globe and Mail)
Howard Wetston, the chairman of the Ontario Securities Commission, photographed at the commission offices in Toronto. (Fernando Morales/Fernando Morales/The Globe and Mail)

A to-do list for the OSC's Howard Wetston Add to ...

He’s funny, he’s smart, and he’s making the Ontario Securities Commission more relevant. Can we keep him?

A little more than a year into Howard Wetston’s term as head of the biggest securities regulator in the country, it’s clear he’s a success.

When he was appointed in late 2010, there was some concern that he would be simply a caretaker as the OSC prepared to join a national regulator a few years hence. That’s hardly been the case.

Good people are heading to work at the OSC. The commission is reaching out to the securities industry to catch up on files where it has lagged, such as the evolving trading business. On the enforcement side, the commission is trying out new tools to increase its success rate in finding and punishing the market’s baddies.

It’s not all sunshine and lollipops. The OSC overstepped its authority on the Sino-Forest Corp. file when it tried to force out executives, then found it couldn’t. In another example, the regulator’s move to use no-fault settlements in enforcement cases comes at the same time as members of the U.S. judiciary are roasting the Securities and Exchange Commission for its use of the tool, which some judges say lets violators off too easy.

But on balance, the first year was a good year for Mr. Wetston, and dispelled any notion that he would be more focused on the national regulator than running the shop.

What’s more, the guy’s a riot. Take my word for this, because I still wouldn’t wish attending the average regulatory hearing on anyone, but the OSC chairman can actually make sitting through normally numbing proceedings pretty entertaining. (When one rambling speaker at the recent hearings on the TMX Group Inc. takeover set up Mr. Wetston by noting that his presentation would make the average investor yawn, Mr. Wetston skewered him with “maybe the average regulator would” too.)

Which makes it all the more unfortunate that Mr. Wetston’s term will soon be halfway finished. He only got a three-year appointment instead of the usual five years amid the belief that the OSC will be subsumed into a national regulator by then.

The former judge is setting himself up as a strong candidate to run the national watchdog. Meanwhile, with only 22 months to go in his term as OSC head, here’s an unsolicited wish list of things Mr. Wetston should tackle:


Regulators need to examine whether it makes sense that for-profit stock exchanges perform a regulatory role by vetting which companies are allowed to list on their markets. The situation begs for a review, especially now that this country could end up with a situation where most of its stock exchanges, including the TSX, are owned in large part by a group of Canada’s largest securities firms. When one of those firms is pushing an initial public offering, will exchanges feel pressure to allow the listing?

There’s a good argument that the listings function should be hived off. The exchanges will fight it, as there is big profit in listings fees, which is all the more reason to take a closer look at the situation.

Due diligence

Just exactly who is responsible when Canada’s system of gatekeepers lets a fraud trade on Canada’s markets? It’s foolish to think that regulators who oversee markets will catch all frauds. But when one is found, it’s never clear who is at fault for letting the company onto Canadian markets. Is it the securities commissions that oversee prospectuses, the investment banks that underwrite the companies as they offer stock or the exchanges that list the shares?

Fiduciary duty

If you live in Ontario and think that your financial adviser has a responsibility to put your best interests ahead of his or her own, you would be wrong. The OSC’s rules say only that financial advisers that Ontarians entrust with their money must deal with clients “fairly, honestly and in good faith.” That’s a long way from fiduciary duty, in which the adviser is expected to act in the sole interest of the client. The OSC should amend the rules to give investors that added consideration.

Accredited investor rules

Being well-off doesn’t make you smart, and it doesn’t make you a sophisticated investor. Yet that’s how securities regulation views it. The rules now say that if you make a lot of money, or have a lot, you can invest in all sorts of things like hedge funds that aren’t available to smaller investors and don’t have the same protections, such as prospectuses. In Ontario, a person with more than $1-million of financial assets or whose income regularly exceeds $200,000 can qualify.

In other words, all the members of the Toronto Maple Leafs, any number of shiftless heirs and plenty of retirees. Does that make them qualified to judge the risk in a hedge fund or a complex security like asset-backed commercial paper? The OSC should take the lead on finding a better way to judge just who is sophisticated.

So there you are, Mr. Wetston. Time’s a wasting.

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