Embrace the Role of the Ontario Securities Commission
The Ontario Securities Commission (OSC) is the largest securities regulator in Canada, enforcing securities laws in the province of Ontario. Functioning as a crown corporation, the OSC is accountable to the provincial government of Ontario.
Understanding the Ontario Securities Commission (OSC)
The Ontario Securities Commission (OSC) regulates exchanges, alternative trading systems (ATS), and quotation and trade reporting systems (QTRS) in Ontario. Like other securities regulators, the OSC strives to maintain market integrity and investor confidence by enforcing securities laws. Primarily, the OSC enforces the Securities Act and the Commodity Futures Act, valid in Ontario.
The OSC crafts securities rules by consulting with the Canadian public, advisory committees, and international organizations. The commission is vested with the authority to take various actions to ensure compliance with Ontario’s securities law. It can issue cease trade orders, demand restatement and refiling of financial statements, and impose conditions on registrations. Moreover, following an enforcement proceeding, it can levy sanctions and fines, although recovering damages for defrauded investors falls outside its purview.
Collaborating with Self-Regulatory Organizations
The OSC acknowledges two valuable self-regulatory organizations (SRO): the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA). These three organizations cooperate to fulfill compliance review duties. The OSC audits advisers, exempt market dealers, scholarship plan dealers, and fund managers. Meanwhile, the IIROC scrutinizes investment dealers and futures commission merchants, and the MFDA oversees mutual fund dealers. Regulatory bodies may subject a firm to a compliance review based on complaints, as part of a broad sweep, or at random.
Understanding the Limitations of the Ontario Securities Commission
Although the OSC’s mission to “foster fair and efficient markets” is wide-ranging, there are restrictions on its legal regulatory capabilities. For instance, in 2017, Canadian markets were disrupted by illicit short and distort campaigns, where short-sellers disseminated false information to lower stock prices. When investors demanded the OSC’s intervention, the commission explained that tangible evidence of intentionally fraudulent statements was required to take action. Unintentional disruptions by short-sellers, who merely identify and short overvalued companies, often fall into legal gray areas open to legitimate market activity. Although the OSC and IIROC possess mechanisms to curb short-selling abuses, deploying them is rare due to potential unintended market disruptions.
Related Terms: Investment Industry Regulatory Organization of Canada, IIROC, Mutual Fund Dealers Association, MFDA, short selling, securities laws.
References
- Ontario Securities Commission. “CSA Consultation Paper 25-403 – Activist Short Selling”.
