The Ontario Securities Commission (OSC) recognizes the regulatory burden being placed on the financial services industry but a new normal in a post-financial crisis world makes it necessary, said Howard Wetston, chairman and CEO of the OSC on Tuesday.
In a conversation with author and broadcaster, Howard Green, Wetston spoke about regulating the securities industry after the collapse of global markets in 2008 and enforcement of those regulations, at Toronto's Rotman School of Management, part of the University of Toronto.
"We're not without understanding the costs associated with [regulation]," said Wetston.
However, interconnected global markets and the devastating impact of the financial crisis make the current regulatory environment necessary.
"It's a very challenging process to get this done and to get it right but it needs to get done because the world cannot afford another financial crisis like we saw seven or eight years ago," said Wetston.
Still, the commission looks to balance regulation with the importance of capital formation, he said.
One example is the work the commission is doing in regards to exempt market regulation, where Ontario has been highly restrictive in comparison to other provinces, admits Wetston.
He states the commission has undergone a two to three-year consultation on capital formation in the exempt market and that a number of issues should be concluded in the near future.
"What is the purpose of all of this? It's to recognize that businesses need opportunities to raise money," he explained. "It's not just what you can list on the Toronto Stock Exchange."
And the area is an important opportunity for investors, as it is one in which there is a great deal of innovation, he added.
Wetston also spoke about more recent developments in the commission's enforcement program, including the possibility of implementing wiretaps. He noted that it was important to keep the move, if it does occur, in context.
If the use of wiretaps is included in the federal criminal code, it would involve insider trading cases and not quasi-criminal cases under the province's securities act, he said.
Wetston also briefly spoke about the possibility of implementing a whistleblower proposal, similar to one used by the U.S. Securities Exchange Commission (SEC). However, there is a distinct difference between the two. If the program comes to fruition, Canadian tipsters can expect less than what their American counterparts would receive. The SEC provides rewards of between 10% and 30% when monetary sanctions exceed US$1 million. The OSC would use the same threshold in Canadian dollars but would provide payments of 15% or less.
"I don't think there's anything standing in the way of [the whistleblower program]," said Wetson.
The only reason to avoid going ahead is if the commission feels the proposal is unworkable following consultations in late April and the review of any further comments, he added.