A wave of debate over the Ontario Securities Commission's recent proposal to offer "no-contest" settlements appears to have given the securities watchdog second thoughts. It now says it will extend a consultation period and hold a public hearing on the proposal in the new year.
The idea, standard practice for the U.S. Securities and Exchange Commission, would allow some potential respondents in OSC proceedings to agree to pay a penalty but neither admit nor deny doing anything wrong.
Such deals are not allowed under OSC's current rules. But the OSC floated the idea of introducing the concept in October, and asked for public comment until Dec. 20. However, since then, the SEC's own longstanding practice has come under increasing fire, after a federal judge threw out a $285-million settlement with Citibank Inc.
The OSC said this week the response to the no-contest idea has prompted to extend the time for public comment until Jan. 16, 2012. It also said it would announce the date for a public policy hearing on the idea in early 2012.
"Due to the level of public interest in the proposed initiatives, the deadline for submitting written comments is extended to Jan. 16, 2012, and a policy hearing will be held by the Commission to seek additional input on the proposed initiatives, particularly the proposed No-Contest Settlement proposal," the OSC said Tuesday in a statement.
Some critics have slammed the OSC's proposal, saying it will make it harder for vicimtized investors to sue in order to get their money back. But the OSC and lawyers who represent those accused of securities violations say such settlements could speed up negotiations that now tend to bog down over admissions of liability. This would allow the OSC, the argument goes, to better use its investigative resources.
Written comments the OSC has received so far on the idea can be found here.
Jeff Gray