Ontario stock regulator softens enforcement

The Ontario Securities Commission is hoping to speed up market enforcement with new rules to encourage people to settle disputes without admitting any wrongdoing.

New 'no contest' rules allow companies to settle without admitting guilt

Ontario Securities Commission chair Howard Wetston is bringing in a new, more lenient enforcement regime similar to one used by the federal Competition Bureau, where he used to head up the investigations branch. (Chris Young/CP)

Ontario's stocks watchdog is hoping to speed up enforcement of securities laws with new rules to encourage people to settle disputes without admitting any wrongdoing.

The Ontario Securities Commission said Friday it will bring in "no contest settlement" measures to deal with insider trading and other stock-related crimes.

The new rules, adopted from U.S. regulators and Canada's competition watchdog, would grant companies and individuals leniency if they voluntarily reveal any trading breaches, and would not constitute an admission of guilt. The new measures could speed up regulatory investigations that now are highly adversarial and can take years to settle.

'We're hoping to resolve problems while they're still relevant to the marketplace'—Tom Atkinson, OSC enforcement director

"We're hoping to resolve problems while they're still relevant to the marketplace," Tom Atkinson, OSC director of enforcement, said Friday.

The regulatory body said the goals of the new mechanisms are to improve the quality and quantity of information it receives and to speed up investigations by its enforcement arm.

"What we want to do is have people come forward and say, 'I've done something wrong... so here's the solution to the problem,'  and then we can move on," Atkinson said.

"Then we can take those resources we would normally spend investigating or litigating and direct them to areas which would provide increased protection for investors."

Investigations can drag on

The OSC has been criticized in the past for allowing investigations to drag on for years, partly because of complicated laws. Atkinson said that is one of the big issues the new guidelines hope to address.

"We make allegations, someone disagrees with those allegations, we can have a trial, a decision has to be rendered, then there's a penalty hearing, possibly an appeal," he said, adding that during that time the issues remain unresolved in the marketplace.

One of the major changes will allow people to settle cases against them without having to explicitly admit any wrongdoing.

The "no contest settlement" was inspired by a similar program in the United States and at Canada's Competition Bureau, the federal body where current OSC chairman Howard Wetston used to work.

The program allows the OSC to issue a protective order, such as a trading halt on a company's shares or removing certain directors, even though there has been no admission of guilt by the party being investigated.

The OSC is the first provincial regulator in Canada to use the no contest settlement program. It encourages parties to correct their actions without fear that their admissions could come back to bite them in civil litigation.

Such an agreement was made recently in the high-profile case of former Liberal MP Tony Ianno, who was accused by OSC staff of manipulating the stock market price of Covalon Technologies Ltd., a medical biosystems company listed on the TSX Venture Exchange. He agreed to pay $100,000 in financial penalties and accept a number of restrictions on his activities for five years — but did not admit to any foul play.

The OSC is the largest of 13 provincial and territorial agencies that oversee Canada's stock markets.