The current structure of the Ontario Securities Commission should be “given further thought,” says the final report of the committee reviewing the Ontario Securities Act.

The recommendation was one of 95 contained in the final report of the Five Year Review Committee, chaired by lawyer Purdy Crawford, and released Friday. The report proposes some significant changes to the regulatory structure, including reconsidering the OSC structure. It noted that the OSC’s internal tribunals “gives rise to perceptions of potential for conflict or abuse.”

The committee didn’t declare whether separate tribunals should be set up, just that the issue should be studied. “We make no recommendation on this issue at this time other than to note that because the structure of a multi-functional agency can give rise to perceptions of potential for conflicts or abuse, the current structure of the Commission merits further thought and study on a priority basis.”

At the same time, the committee withdrew its recommendation that the Investment Dealers Association of Canada be split into its SRO function and its trade association function. It does recommend that the IDA consider whether improvements can be made to certain of its structures, such as the composition of its disciplinary panels and the membership of its board of directors, to lessen perceptions of conflict of interest.

“We suggest the IDA look again at the structure of its disciplinary panels; as two-thirds of the members of a disciplinary panel are IDA member representatives, there may be concerns about the perceived independence of the panel. In addition, we note that by 2004, when changes to the IDA’s Board of Directors are implemented to add more non-member directors, there will still be a majority of non-independent directors. We encourage the IDA to reconsider this allocation.”

It also recommends that the commission study whether the Act should be amended to give SROs: jurisdiction over current and former members; the ability to compel witnesses; the ability to file decisions of disciplinary panels as decisions of the court; statutory immunity; and, the power to seek a court-ordered “monitor” for firms that are in chronic non-compliance.

The final report also supports various legislative changes that have been enacted to improve investor confidence, including: increased court fines and prison terms for general offences, new powers for the OSC to impose fines for securities violations and to order offenders to disgorge their ill-gotten gains, and, new rule making powers for the OSC to make corporate executives accountable for the financial statements and internal controls of their companies and to ensure that audit committees of public companies play appropriate role in ensuring the integrity of those financial statements; and, secondary market civil liability.

The government says it will strike a select committee of the Legislative Assembly to review the report, consult with the public and the financial community, and report back to the government this fall. Based on the feedback the government is prepared to introduce further legislation by the end of the year.

“I am very pleased with the committee’s work,” said Ontario Finance Minister Janet Ecker. “Up-to-date securities laws play a critical role in making sure we have fair and efficient capital markets. Our government is committed to maintaining timely and effective securities laws in order to protect investors and create further growth and new jobs. The committee also advocates moving toward national securities regulation, a position that the government of Ontario strongly supports.

“Their recommendations will help us move forward in our continuing efforts to protect Ontario investors and protect the integrity of our markets. Feedback on the final report will be important in terms of developing draft legislation for further consultation.”