TORONTO – Ontario’s top securities regulator is making changes to its enforcement policies, including allowing some of those accused of wrongdoing to plead no contest and pay a fine.
The Ontario Securities Commission says the option will only be used in “limited circumstances” when there is no denial of facts laid out in an investigation by commission staff and there is acceptance of sanctions outlined in a settlement agreement.
The policy, which is commonly used by the U.S. Securities and Exchange Commission, will help the OSC speed up some regulatory cases where defendants do not want to admit guilt in case it is used against them in another proceeding.
The OSC says the new “no-contest” policy will not be permitted in situations where the accused has engaged in abusive, fraudulent or criminal conduct; behaviour of the accused has resulted in investor harm not addressed adequately, or when the accused “misled or obstructed” staff during the investigation.
“Staff emphasize that they will continue to hold persons appropriately accountable for their misconduct,” according to the new policy, outlined Tuesday in a 10-page document.
However, the Canadian Foundation for Advancement of Investor Rights (FAIR) says the policy raises several concerns, alleging that it isn’t consistent with the commission’s mandate to protect investors.
“We’re concerned that they (the policies) may have the overall effect of reducing deterrents and end up being viewed . . . (by) wrongdoers as a licence fee for wrongdoing,” said Neil Gross, executive director with the non-profit advocacy group.
“You can pay a fine and be on your merry way.”
Gross says the accused should only be permitted to plead no contest in “exceptional” circumstances and in cases where they have already provided compensation to victims.
“There is a lack of transparency and accountability with theses types of settlements,” Gross said. “It’s impossible in viewing them, in absence of an admission of wrongdoing, to know whether the resulting penalty is appropriate or too lenient.”
The group also pointed out the use of this policy has also faced criticism by courts in the United States.
But the OSC says a hearing panel at the commission will retain the right to approve or reject any no-contest plea.
“These new tools will help staff strengthen the presence and effectiveness of the OSC’s enforcement program to protect investors and promote public confidence in the capital markets,” said Tom Atkinson, director of enforcement for the OSC.
Among the other policy changes, the regulator says it has clarified its self-reporting process, improved public disclosure for those who co-operate during enforcement investigations and created a new program for no enforcement action agreements.
The OSC also says it is continuing to consider putting in place a whistleblower program that would involve monetary incentives to those who can give it “actionable information about misconduct in the marketplace.”
“The four initiatives will potentially allow us to resolve enforcement matters more quickly and issue more protective orders earlier,” Atkinson said. “When heightened accountability from respondents is paramount, we will continue to seek admissions as part of any proposed settlement agreement.”
The OSC is a regulatory body that administers and enforces Ontario’s securities and commodity futures laws.
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