OSC chair asks for review of civil action timelines

(June 17, 2005) Ontario Securities Commission chair David Brown says he will ask the provincial government to take another look at the current two-year limitation period currently in place for investor lawsuits.

The limitation period was recently quietly reduced to two years from six in a number of provinces, including Ontario, Alberta and Saskatchewan.

“We heard that investors with a grievance need time to pursue all of their avenues — including the courts,” Brown said Thursday before the Senate Committee on Banking, Trade and Commerce in Ottawa. “One frustration that retail investors have raised is the limitation period on investor suits. Under Ontario’s new Limitations Act, a uniform two-year limitation period applies to all actions except those that are specifically carved out, such as OSC actions.”

“Unfortunately, this leaves plaintiffs with a narrow window for bringing an action,” Brown added. “Although a number of considerations pause the clock, we have learned that aggrieved investors do not always discover the full consequences of a problem until two years have lapsed. And for a life-altering event — like losing a chunk of your life savings — it takes time to come to terms with the problem. Attempting to obtain voluntary redress from a dealer or advisor can consume valuable time. And investors who pursue arbitration must relinquish the option of court action.”

“For these reasons, we are suggesting to the Ontario government that it would be well-advised to take another look at the two-year cut-off,” he said.

The two-year limit was also raised at the recent OSC investor town hall in Toronto by Stan Buell, head of the Small Investor Protection Association.

“The OSC event confirmed that investor protection is lacking, and that there are no satisfactory means of resolving disputes except civil litigation,” Buell says. “Now, that last bastion of help for investors is being threatened.”

“Investors are warned that reduction of the limitation period for taking civil action could have serious consequences if you have a complaint,” he adds. “SIPA recommends that aggrieved investors should speak immediately with a qualified securities litigation lawyer to determine how limitation periods could affect you, and determine an appropriate course of action prior to initiating any other complaint procedures.”

Buell says SIPA is seeking clarification on the limitation issue with governments and regulators across the country and will be issuing a report on the subject later this month.

For his part, Brown conceded before the Senate committee that the country’s regulatory system — intended to address the grievances of investors — has been a source of frustration instead. “Many investors don’t know where to turn,” he noted. “Among many who have that knowledge, there’s a lack of trust. That being said, we want to improve our understanding of the challenges facing retail investors.”

“One of the most important results of the town hall was the validation of dialogue,” he added. “Investors have a right to relate their experiences and views to the organizations responsible for protecting their rights, and to hold us accountable in a public forum. Regulators need to hear their stories, in their own words.”

To that end, Brown said the OSC will immediately start working to establish an investor panel to provide advice and commentary on an ongoing basis, based on feedback from the town hall.

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