On April 29, 2022, the Ontario Securities Commission (OSC) announced the implementation of structural and governance changes resulting from the proclamation of the Securities Commission Act, 2021 (the Act). As discussed in a previous blog post, the Act, which was introduced in March 2021, outlines the governance and accountability functions of the OSC. The Act reconstitutes the OSC as a regulatory authority, bifurcating its tribunal and regulatory functions. This bifurcation includes the launch of the Capital Markets Tribunal, the new adjudicative division at the OSC. The changes to the OSC’s structure outlined in the Act reflect certain recommendations by the Ontario Capital Markets Modernization Taskforce (the Taskforce) in its January 22, 2021, final report [PDF] (the Final Report).

Certain of the key differences between the former framework and the new OSC structure arising from the Act — as well as the underlying rationale for such structural changes — are summarized below.

Overview of key changes

The bifurcation of the OSC’s tribunal and regulatory functions includes the following key changes:

  • There are now two distinct positions at the OSC: the Chair and the Chief Executive Officer (CEO). The Ontario government selected Grant Vingoe as the first dedicated CEO of the OSC and appointed Heather Zordel as non-Executive Chair of the OSC’s Board of Directors. Eight individuals were appointed or reappointed to the OSC’s Board of Directors. The CEO will also be a member of the Board. You can view the OSC’s organizational chart on its website.
  • Tim Moseley was appointed as Chief Adjudicator of the new Capital Markets Tribunal, and nine individual adjudicators were also appointed.[1] Tribunal proceedings, a hearing schedule and resources are now available on the Capital Markets Tribunal website.
  • The Capital Markets Tribunal has adopted its own Rules of Procedure and Forms (Rules) and Practice Guideline, which took effect on April 29 and apply to all proceedings before the Tribunal. The Rules and Practice Guideline replace the former OSC tribunal’s Rules of Procedure and Forms and Practice Guideline and, as of now, only include the formalistic changes necessary to reflect the establishment of the new Tribunal.

Takeaways

The Taskforce’s Final Report, mentioned above, published 74 wide-ranging recommendations based on extensive consultations with stakeholders. These recommendations included the separation of the roles of OSC Chair and CEO, as well as the separation of the regulatory and adjudicative responsibilities of the OSC. A summary of these recommendations can be found in our previous blog post.

According to the Final Report, the separation of the Chair and CEO roles is meant to support a more effective delivery of the OSC’s mandate as a modern and globally competitive capital markets regulator. The Board Chair is tasked with focusing on strategic planning and corporate governance, while the CEO focuses on the execution of the mandate and operational management of the regulator. With regard to the Tribunal, the Final Report summarized the views of stakeholders that the OSC’s corporate governance would be strengthened by establishing clear boundaries between the regulatory and adjudicative decision-making functions of the regulator.

The announcement of the implementation of these structural and governance changes at the OSC immediately follows the publication of its Statement of Priorities [PDF], which we discussed last week. Among other things, the Statement of Priorities also highlights the intended independence of the adjudicators and the adoption of Adjudication Guidelines, which are meant to enhance the transparency and perception of even-handedness of the OSC’s adjudicative processes.

It will be interesting to see if these reforms result in any meaningful change in the adjudicative approach of Ontario’s capital markets regulator. There also may be further changes on the horizon if the new proposed Capital Markets Act is passed, a draft of which was published for stakeholder consultation in October 2021 and is still under review [PDF]. The draft provisions in that Act provide a new right for Staff to appeal Tribunal decisions. This could be a material change, especially when Staff is faced with decisions such as the recent case of David Sharpe et al. [PDF], which would impact on Staff’s investigative practices (as discussed in a previous blog post).