Skip to main content

The Globe and Mail

New OSC chief Jeff Kehoe will boldly pursue new types of cases

The new head of enforcement at the Ontario Securities Commission (OSC) Jeff Kehoe.

Charla Jones/The Globe and Mail

The new head of enforcement at the Ontario Securities Commission says he has been handed a mandate to be "strong and courageous" in pursuing new types of cases that will send signals to people breaching laws in different areas of the capital markets.

In his first major interview since taking the helm of the OSC's 160-person enforcement division in October, Jeff Kehoe said he has been told to be bold, and plans to tackle a wider range of cases than the OSC has prosecuted in the past.

"We have to be strong and we have to be courageous," he said. "We have to take cases that are not surefire wins; we have to take cases that are designed to send strong regulatory messages that are aligned with our strategic priorities."

Story continues below advertisement

Mr. Kehoe said the enforcement division is reviewing new types of issues – including mutual fund trading involving unacceptable incentive payments as well as misleading disclosures using non-GAAP financial measures – that are significant concerns to other OSC staff who oversee various parts of the capital markets, such as staff in the corporate finance section or the mergers review group.

"They help us identify the high risks, they help us investigate, and then we send clear messages to the street," he said.

The OSC is currently participating in a review of how syndicated mortgage products are regulated in Ontario, which could result in another new area of enforcement for the commission, he said.

Currently the sale of syndicated mortgage-based securities – a market worth $6-billion annually in Ontario – is entirely regulated by the Financial Services Commission of Ontario (FSCO), which does not have a track record of aggressively prosecuting wrongdoing. But Ontario Finance Minister Charles Sousa said in his fall economic review that his staff have set up a working group to review mortgage security regulation.

Mr. Kehoe said the OSC receives complaints about fraud in the sale of syndicated mortgage products, but has no jurisdiction to investigate them and must refer all the cases to FSCO. He said the enforcement team could easily add mortgage products to its oversight because they are marketed and sold similarly to many other investment products.

Prior to joining the OSC in October, Mr. Kehoe spent 12 years at the Investment Industry Regulatory Organization of Canada (IIROC), the self-regulatory organization for Canada's brokerage industry, where he was head of enforcement from 2010 to 2013. He left IIROC in 2013 to work for entrepreneur Michael Wekerle, co-founder of Difference Capital, and left that job in July, 2015.

Mr. Kehoe said he was drawn to the OSC because he wanted to return to a public service role, which he finds meaningful work.

Story continues below advertisement

He said a key priority in his new job will be to find ways to make greater use of emerging technology, especially the field of data analytics, to assist investigators. With capital markets "changing at breakneck speed," and with new investor risks emerging constantly, he said regulators have no choice but to "adapt, or else."

New technology can help the commission scan social media sites to spot scams or wrongdoing even before victims have filed a complaint, he said. It can also speed investigations by sifting through reams of data such as thousands of e-mails or millions of pieces of trading information.

"Instead of waiting for the complaints, waiting for somebody to come forward, we could identify the risks, do some quick analysis and become an early disruptor," he said.

Mr. Kehoe is optimistic the OSC's new whistle-blower program, introduced in July, will also help the enforcement division uncover bigger cases that are hard to detect, including illegal insider trading.

"The [U.S. Securities and Exchange Commission] has been successful and I don't see any reason why we would not be as successful," he said. "It only takes one or two strong cases to essentially send a strong shot across the bow."

He is less optimistic, however, about an initiative by the OSC to get new powers under federal legislation to use wiretaps in investigations of insider trading. Mr. Kehoe was formerly a wiretap agent when he worked as a Crown attorney earlier in his career, and said he knows firsthand how slowly wiretap approvals happen and how expensive it is to monitor tapped phone lines.

Story continues below advertisement

With insider trading often a "sporadic" crime, typically involving minimal conversations over long periods, he isn't certain a lot of useful evidence can be gathered at a reasonable cost with wiretaps. "I'm not sure it would be a panacea," he said.

Report an error
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.