OSC pledges tougher and more visible enforcement

Plans for Canada’s largest capital markets regulator nod to Ontario government expectations of less regulatory burden

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The Ontario Securities Commission is planning to toughen up — and make more visible — its response to capital markets misconduct and build the regulator’s reputation as an effective enforcer by vigorously prosecuting serious financial crimes, taking on novel and sophisticated files, and increasing the collection rates for penalties imposed.

The commitments are included in a six-year strategic plan for Canada’s largest capital markets regulator laid out Friday, which also includes a pledge to foster conditions for capital formation and innovation in both public and private markets.

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The market watchdog operates at arms-length from the Ontario government, but the strategic plan reflects government goals such as ensuring market players aren’t bogged down by undue burden of regulation. The 33-page document pledges to “dynamically right-size regulation” and the first two goals in that category are to make the Ontario market more attractive to diverse groups of businesses and investors and to make sure regulatory actions are effectively assessed for appropriateness and effectiveness. The third is to reduce undue burden for market participants.

“Ontario businesses and investors need an efficient, responsive and proactive capital markets regulator in order to thrive and participate confidently in our markets,” OSC chief executive Grant Vingoe said in a statement. “To address the growing speed and complexity of our markets, we need to be bold and agile, and equipped to represent the interests of Ontario’s businesses and investors within Canada and internationally.”

A handful of high-level and long-serving executives across the regulator departed earlier this year as the strategic plan was developed, the first multi-year roadmap rolled out since 2011. Departures included Jeff Kehoe, head of enforcement, who left the OSC in February. He was followed by Tyler Fleming, who led the OSC’s investor office and was a member of the executive management team, Debra Foubert, the regulator’s director of compliance and registrant regulation, and Pat Chaukos, who headed up the OSC’s innovation office.

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Other objectives laid out in the strategic plan to carry the regulator through 2030 include improving the market experience for individual investors — both self-directed and those who get advice — and quickly delivering effective regulation in anticipation of emerging trends.

At a luncheon in Toronto on Friday, Vingoe said a new division has been created within the OSC to scan the horizon and determine a regulatory response to emerging trends such as artificial intelligence. He pointed to how the regulator dealt with cryptocurrency as a potential model for new financial products and marketplaces that will develop.

Once risks associated with products and services enabled by the new technology behind crypto were identified, he said, the regulator established a task force and obtained outside specialized resources to understand the blockchain technology and unique bankruptcy issues associated with it.

Though the OSC got involved in crypto markets relatively early compared to other regulators, “it was already quite developed and entrenched by the time we began to deal with it,” Vingoe said. “So we learned how to quickly respond.”

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He said the six-year plan for the OSC will reduce silos and set the stage for a more cross-disciplinary approach. Some of the 22 separate offices under the old framework are being rolled into fewer, larger units — including a new branch devoted to trading and markets that combines dealer policy, derivatives and market regulation. There will also be a new registration investigations and examination team with “more intensive oversight” than in the past, he said.

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