Finance Ontario – New Regulation made under sections 19(2)(b)(iii) and 36(0.1) of the Securities Commission Act, 2021 that prescribes additional purposes for which the Ontario Securities Commission (OSC) can use enforcement money

Finance Ontario – New Regulation made under sections 19(2)(b)(iii) and 36(0.1) of the Securities Commission Act, 2021 that prescribes additional purposes for which the Ontario Securities Commission (OSC) can use enforcement money

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Finance Ontario – New Regulation made under sections 19(2)(b)(iii) and 36(0.1) of the Securities Commission Act, 2021 that prescribes additional purposes for which the Ontario Securities Commission (OSC) can use enforcement money

Letter Summary:

Currently, the OSC can allocate money it receives from enforcement orders or settlements (“enforcement money”) for one of the purposes specified in section 19(2)(b) of the Securities Commission Act, 2021:
i. To or for the benefit of third parties;
ii. For use, by the Commission or third parties, for the purpose of educating investors or promoting or otherwise enhancing knowledge and information of persons regarding the operation of the securities and financial markets; or
iii. For any other purpose specified in the regulations.
The Ministry of Finance is proposing to make a new regulation that would prescribe two new purposes for which enforcement money (both newly collected and previously designated) can be used:

  1. For use by the Commission to enhance its capabilities in information technology, data acquisition and data analytics in order to address regulatory matters relating to investor protection, the reduction of systemic risk or the integrity of the capital markets. For example, the enhancements may consist of the development, purchase, installation or deployment of software or hardware or the implementation of special projects relating to data integration or risk modelling. Ongoing operating costs are not included in this purpose.
  2. For use by the Commission to fund activities of the Commission’s Office of Economic Growth and Innovation that are aimed at fostering innovation, capital formation and competition in Ontario’s capital markets.

Overview of the Council’s Comments:

We agree that there is a need to revisit the process and specified purposes to make greater and more effective use of funds collected through the Commission’s enforcement efforts. However, we believe that eligible and worthwhile disbursement opportunities within the existing permitted purposes for enforcement monies may exist, and that these should be prioritized at greater scale with improvements to process and transparency prior to any evaluation of the need for expanded permitted purposes.

If an expansion of permitted purposes is deemed necessary, this should come with prescribed guidelines prioritizing accountability, transparency, and a requirement to ensure that funds are used primarily to promote the interests of investors and market integrity.