OSC bows to pressure on disclosure of investigations

(October 21, 2004) Ontario’s securities regulator, which has in the past refused to confirm if a company or individual is under investigation, is backing away from that strict policy, today publishing guidelines for staff to use to decide whether it is appropriate to disclose an ongoing investigation.

“Investors and our markets are best served when correct material information is available to all stakeholders on a timely basis,” says Michael Watson, the Ontario Securities Commission’s director of enforcement. “These guidelines outline the circumstances in which we feel that the value in disclosing an investigation outweighs any risk associated with the disclosure.”

“In publishing these guidelines, we are enhancing transparency in our processes,” Watson added.

In most cases, ongoing investigations will not be disclosed to avoid prejudicing the case, the OSC says. However, in certain circumstances, OSC staff may notify a market participant that the existence and nature of an investigation should be disclosed.

The OSC says investigations might be disclosed when there is a need to protect investors from fraud or in situations where related investigations by criminal law authorities or other regulators have already been released.

In addition, the regulator says it might choose to disclose when “confidence in the capital markets could be harmed by a failure to confirm that a matter is under regulatory consideration,” or to confirm a disclosure by a market participant that they are being probed or to correct any misleading information about an investigation.

The OSC anticipates that the firm or individual will be given the opportunity to announce the investigation first, before OSC staff takes that step, “except in exceptional circumstances.”

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