Ontario acts on civil liability, independent tribunals

(November 2, 2004) The Ontario government is moving ahead with several key changes to the province’s securities legislation, including giving investors the right to sue companies for fraud and restructuring the Ontario Securities Commission.

Chair of Management Board Gerry Phillips says the creation of a single national securities regulator remains his top priority. But he’s taking action on some immediate initiatives, including civil liability for secondary markets.

“Civil liability gives investors the right to sue companies for misleading disclosures or fraudulent actions,” Philips said yesterday in the provincial legislature. “Similar rights already exist in the primary market,” he explained. “This means that investors can sue now, if, for example, there are false or misleading statements in a prospectus on an initial public offering. But currently, investors do not have the same rights, after the initial public offering, in the trading that occurs every day in our markets, and that is where the vast majority of trades occur.”

Phillips expects to introduce legislation on civil liability this fall. Other recommendations made by the province’s finance committee will be dealt with further down the road, such as the controversial concept of creating an independent adjudicative tribunal separate from the OSC.

That was one of the main topics debated on Monday at the Ontario Securities Commission’s annual conference on Monday in Toronto. Coulter Osborne, whose report concluded there was “clear and convincing” evidence in favour of independent tribunals, says he believes the project can be done cost-effectively and “won’t be a great drain on the resources” of the OSC.

OSC chair David Brown expressed guarded support for the Osborne report, stating that while independent tribunals would simplify the operation of the commission and would remove the perception of bias, more thinking needs to be done on the issue.

“We have to make sure the new system protects investors,” he said. “Most agencies are set up this way because it’s proven to be the most effective.”

British Columbia Securities Commission chair Doug Hyndman favours maintaining the status quo, arguing that the inherent expertise within securities commissions might be lost under the tribunal system.

“The idea of having these tribunals doesn’t make much sense to me,” he said. “Many of the people calling for this might come to regret it.”

Still, Phillips seems unmoved by opposition to the tribunals, telling reporters yesterday he hasn’t heard any strong arguments against the idea.

The minister hopes to introduce the tribunals within the next 12 months, delaying the process in the unlikely event that the provinces can agree on a single national regulator before that deadline. It’s assumed that any new national regulator would also have an independent tribunal structure.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com