On March 28, 2018, the Ontario Liberal government released its 2018 budget (the 2018 Budget). As part of a broader emphasis on consumer and investor protection, the 2018 Budget contains a number of proposals to update securities law and provide the Ontario Securities Commission (OSC) with new tools to fight securities law violations. While the 2018 Budget does not specify how or when these proposals will be implemented (which may depend on the outcome of this June’s provincial election), it underscores the provincial government’s view that capital markets enforcement is an important part of its consumer and investor protection priorities.

The 2018 Budget contains a number of specific proposals designed to enhance and expand the OSC’s securities enforcement capabilities:

  • New offences for breach of an undertaking and for obstruction of an investigation in both the Ontario Securities Act and the Ontario Commodity Futures Act;
  • Giving the OSC authority to make automatic and non-automatic reciprocal orders on key orders issued for certain court convictions or by another provincial securities regulator, for example, for specific sanctions;
  • Streamlining the administrative penalty process for first-time violations of certain registration and prospectus requirements in the Securities Act; and
  • Streamlining information-sharing processes in enforcement proceedings (OSC Staff currently needs to seek internal approval in order to share information with other regulators, which has caused delays)

Several of the 2018 Budget’s proposals (such as the ability of the OSC to automatically make reciprocal orders imposed by other regulators) are designed to increase the OSC’s ability to cooperate with other agencies and securities regulators in connection with a broader, national effort to combat securities fraud. The 2018 Budget contemplates increased cooperation between the OSC’s enforcement activities and the Ontario Ministry of the Attorney General’s efforts to investigate and prosecute criminal fraud, including through the Serious Fraud Office, which the Ontario government committed to establish in 2017.

In addition, the 2018 Budget emphasizes the provincial government’s “support for a fair and efficient complaint resolution system for investors”, and pledges that it will work with the OSC to bolster the framework for securing compensation for investors who have suffered losses as a result of registered firms’ acts or omissions. The 2018 Budget does not explain how this will be done, nor does it discuss whether any such changes will impact the role of dispute resolution mechanisms currently available to investors, such as the Investment Industry Regulatory Organization of Canada’s arbitration system.

The 2018 Budget also proposes a regulatory scheme for financial benchmark administrators, contributors, and users, with the stated objective to prevent the manipulation of financial benchmarks and to bring them into alignment with newly introduced international requirements. The increased scrutiny of financial benchmarks on a global scale comes in response to serious cases involving the alleged manipulation of interest rate benchmarks such as the London Interbank Offered Rate and Euro Interbank Offered Rate (for instance, in United States v. Allen, which we discussed here).

In addition to these proposals, the 2018 Budget underscores the provincial government’s pledge to regulate financial planners, to implement the Cooperative Capital Markets Regulatory System, and to create the Financial Services Regulatory Agency of Ontario (FSRA, the proposed financial services and pension regulator). The 2018 Budget states:

“The new FSRA organization is being built based on the vision of the mandate review panel. FSRA is currently moving to establish key pieces of its new organizational structure including upgrading key information systems.”