The Ontario Securities Commission has announced a “credit for cooperation” policy designed to encourage cooperation with OSC staff during an investigation.

“This policy is intended to encourage firms and individuals to work with regulators to resolve compliance-related problems,” said OSC Chair David Brown. “It gives us greater flexibility when the party has cooperated fully during the investigation and has self-policed, self-reported, and self- corrected the problems.”

The policy enables OSC staff to choose one or more favourable approaches to resolving outstanding issues, including:

  • narrowing the scope of allegations;
  • recommending reduced sanctions;
  • submitting settlement agreements for approval by the Executive Director rather than a tribunal of the commission;
  • obtaining an undertaking to avoid future violations of Ontario securities law;
  • issuing a warning letter; and
  • concluding the matter without taking any action.

. The “credit for cooperation” policy was invoked today when a settlement agreement was approved for the first time by the OSC’s Executive Director, saving time and expense for all parties while ensuring a message of deterrence has been sent to the marketplace.

Thomas Hinke, the president and CEO of Thermal Energy International Inc. failed to file insider reports relating to his transactions in TEI shares during the period from December 1996 to December 2000. In addition, some of these transactions constituted a distribution of TEI shares and therefore required either a prospectus to be filed or an exemption to be obtained. Hinke voluntarily disclosed his filing defaults and cooperated with OSC staff throughout its investigation.

In the settlement agreement, Hinke undertook to make all future required regulatory filings regarding his transactions in TEI shares in a timely manner, and made a voluntary contribution of $8,000 to the OSC’s Investor Education Fund.

“The fact that Mr. Hinke took the initiative in bringing this matter to our attention and cooperated fully with our staff was a key factor in our decision to offer an expedited procedure,” said OSC director of enforcement Michael Watson.