New powers proposed for the Ontario Securities Commission would give Canada’s largest capital markets regulator tools to shut down obvious cases of white collar crime faster than before, while also confronting problems such as document shredding that can hinder investigations.
Speaking for the first time since the proposals were announced in the Ontario provincial budget last month, officials with the Ministry of Finance told The Globe and Mail in a background briefing that the changes are designed to streamline the OSC’s ability to confront market offenders.
Clear-cut cases of securities law violations, such as illegal selling of unregistered shares, would be handled more quickly under the proposed changes, so that the offender is barred from the market without draining resources from more complex investigations.
“The commission would have a streamlined process available to it, so that it could get at those less-serious offences and ensure that those are dealt with, versus having to make a tough choice as to whether they’re going to divert resources from more serious offences,” a senior Finance Department official said in the briefing.
The budget announcement, which came after a Globe investigation late last year exposed numerous problems with the regulator’s ability to clamp down on securities fraud, included several changes to the way the OSC would be able to approach cases.
One proposed change would allow the OSC to automatically implement decisions made by other provincial securities regulators, speeding up its ability to act. Presently, if a person is found to have violated securities laws elsewhere in Canada, the OSC typically must hold a hearing before issuing a similar order. That process has led to unnecessary delays in confronting some cases.
“Currently the securities commission can reciprocate orders, but they don’t do it automatically. They’re required to give notice, and an opportunity to be heard, to the parties,” a senior Finance official said. “What this change would do would be to say, ‘Listen, you had your first hearing already,’ allowing the OSC to move more quickly on shutting down the offender,” the official said.
Canada uses a patchwork of 13 securities regulators across the country. The investigation found numerous cases where white collar criminals exploit weaknesses in this system by moving from province to province, with securities commissions sometimes struggling to keep pace.
As Canada’s largest securities regulator, the OSC oversees the majority of the country’s capital-markets activity.
Other proposed changes would give the regulator tools aimed at preventing white collar criminals from destroying or withholding evidence and to punish them for doing so.
Two new categories of offences have been proposed in the budget – for obstructing an investigation and for breaching an undertaking. The new offences would be useful in situations “where there is concern that documents are being destroyed and then you need to move very quickly and get your order in as quickly as you can,” a senior Finance official said.
Another proposed change would let the OSC share information gleaned from its investigations in situations where authorities are looking to seize assets from offenders. Some of the proposals are still being drawn up so the government was unable to provide specific details on how they would work.
The Globe’s investigation looked at up to 30 years of securities cases across the country. The analysis revealed several problems, including white collar criminals exploiting gaps in the system to commit multiple offences. One in nine offenders caught violating securities laws returned later to commit further crimes, suggesting deterrence efforts in Canada are not working. One person was issued multiple lifetime bans but continued to operate.
In late December, the federal Department of Finance said it had taken note of the problems and instigated discussions with the provinces on how to fix some of the issues. In late March, the Ontario government said in the budget that it wanted to confront weaknesses in the system.
“Fair, vigorous and timely enforcement of Ontario’s securities laws is essential to protecting investors and fostering confidence in the capital markets,” the province said.