In a bid to resolve enforcement matters more quickly and effectively, the Ontario Securities Commission today announced a series of proposed enforcement initiatives that would include permitting market participants to enter into no-contest settlements.
According to the notice, the timeliness and effectiveness of OSC investigations are currently being affected by the concerns of those being investigated that actions taken in response to an investigation may prejudice concurrent or potential civil litigation. As such, the OSC has proposed the following measures:
- No-enforcement action agreements - Such agreements would be explicit in circumstances where market participants self-report and immediately remediate, and would be available in a number of situations. OSC Staff could also consider an agreement where a self-reporting party also reports in respect of the conduct of other parties where the conduct in question was jointly carried out. While Staff have simply advised participants that no action will be taken under the current processes, the proposals would make their decisions explicit with the result of greater certainty for market participants.
- No-contest settlement program - Although recent amendments to the OSC's Rules of Procedure (Rule 12) have eliminated the explicit requirement for admissions in settlement agreements to be presented to a Commission panel for approval, settlement agreements generally include an admission of facts and of non-compliance with Ontario securities law or conduct contrary to the public interest. The program will therefore allow cooperative respondents to resolve enforcement matters without admitting facts or to non-compliance with securities law. Such settlements would have to meet the public interest requirements set out in the Securities Act and would be limited to respondents not previously subject to enforcement or regulatory activity by the OSC or another agency.
- Clarified process for self-reporting - This proposal would introduce a proffer process to provide greater transparency and certainty for self-reporters.
- Enhanced public disclosure for credit granted for cooperation - The proposal would enhance disclosure regarding the credit granted for cooperation in respect of proceedings before hearing panels, settlements and matters relating to the proposed no-enforcement action agreement.
The OSC is accepting comments on its proposals until December 20.
In addition to these proposals, the notice also states that OSC Staff are examining the prospect of introducing a new whistleblower program, under which incentives would be provided to persons who provide information about marketplace misconduct. If implemented, this would be a first for securities regulators in Canada. The whistleblower program is currently the subject of ongoing study, and an OSC notice inviting public comment may be published in the near future. As we discussed earlier this year, the SEC implemented its own whistle-blower bounty program in response to Dodd-Frank mandated requirements.
For more information, see OSC Staff Notice 15-704.