Interim report recommends rule-making powers for OSC

The interim report of the Ontario securities regulation task force recommends giving the Ontario Securities Commission (OSC) powers to make binding rules.

The report also recommends that OSC policy statements should be used to guide the OSC’s statutory discretionary authority when deciding individual cases. Examples of the OSC’s discretionary authority include the power to cease trading of securities, register market participants and exempt a person or security from the registration or prospectus requirements. The task force was appointed last October by Ontario Finance Minister Floyd Laughren, following the decision in a case involving Ainsley Financial Corp. and the OSC. The case pertained to the OSC’s use of a policy statement to address concerns on the marketing of penny stocks in the province. The mandate of the task force is to ensure that securities regulators have the legislative powers they need to protect investors and the integrity of Ontario’s capital markets.

As a first step, the report recommends the OSC review its existing policy statements to determine which should be elevated to rules and which should remain as policy statements.

The report proposes that when a new rule is drafted, a 90-day “notice and comment” period for public response should be provided.

Following this period, OSC staff would provide a summary of comments received and the OSC commissioners would have to write a report in response. Both documents would be published with the next draft of the rule. Before becoming effective, the final draft would be subject to possible cabinet disapproval. The task force also recommends that clear purposes and principles of securities regulation be set out in the Securities Act, to provide a framework for the OSC’s mandate and the scope of its jurisdiction. In addition, it recommends new ways for the finance ministry to communicate its priorities and policy concerns to the OSC. These include giving the government the power to order the OSC to investigate a specific policy matter, and requiring the OSC to report annually to a standing committee of the legislature.

The task force is chaired by University of Toronto law professor Ronald Daniels. The public is invited to respond to the interim report by March 24. The task force’s final report is expected this spring.