In his address to the Ontario Securities Commission’s Dialogue conference today, OSC chairman, David Brown, detailed the regulator’s latest efforts to make markets fair.

Brown discussed the OSC’s efforts to investigate possible abusive trading practices in the mutual fund industry, new recommendations for combatting illegal insider trading, and the OSC’s investor confidence efforts from earlier in the summer.

Brown said investors need to be secure in the knowledge that markets are fair. The commission’s goal isn’t to eliminate risk, he said, but to ensure that the risks investors take are fair. He distinguished between concepts of fair and unfair risk, saying, “Investment risk is what you take when you make decisions by assessing a company on its prospects, on the risks it faces in its competitive environment. That’s investment risk – the type markets thrive on.”

“Unfair risk is what stems from the potential abuses that the investor does not — or can not — know about. These risks arise from unfair and unforeseen practices like fraud, illegal insider trading, market manipulation and other forms of malfeasance.”

Responding to the scandal in the U.S. fund industry, last week the OSC asked Canadian fund managers to explain their policies for detecting similar abuses. Brown stressed that the commission is trying to do this efficiently. “We asked for clear descriptions of their investigative processes. We’re committed to more protection, not more bureaucracy.”

He also said that the OSC is committed to following up on what it learns, based on the specifics of practices in our market. “We will investigate issues identified by respondents and conduct random reviews,” he said.

Brown said that taking the unfairness out of risk-taking also includes addressing illegal insider trading. “We cannot have two classes of investors in Ontario — those who are basking in the warmth of insider knowledge and those who are left out in the cold,” he said. The report from the Illegal Insider Trading Task Force, published by the Canadian Securities Administrators, includes 32 recommendations to combat illegal insider trading, focusing on prevention, detection and deterrence.

Brown reiterated the importance of the OSC’s proposed rules to enhance corporate governance. “Taking the unfairness out of risk-taking includes the way we have responded to the recent corporate scandals. The scandals may have taken place on the U.S. side of the border, but the need to restore investor confidence is just as clear right here. Investors wanted to be assured that all jurisdictions were acting to protect them. And they were prepared to take that into account in their investing strategy,” he said.

On this front, Brown said that its next step is to issue policy direction and guidance on other corporate governance initiatives such as board independence, codes of ethics, nominating committees and compensation committees.