Howard Wetston, Ontario Securities Commission (OSC) chairman, says the regulator expects market players to abide by the spirit of its rules, not just the letter of the rules, as the industry and regulators must work together to bolster investor confidence.
In a letter published Wednesday as part of the OSC’s 2013 annual report, Wetston indicates that the regulator views investor protection “as a shared responsibility”. And, to that end, he suggests that the commission expects more than technical compliance from firms and individuals that participate in the market.
“We expect market participants to conduct themselves in a manner that is consistent with the principles of securities regulation. This requires market participants to respect not just the letter of the law, but also the spirit of the law,” he says in the report, stressing that “confident investors make for a confident and effective securities industry.” Absent that confidence, investors will reject even minimal risk-taking, he suggests.
In the same report, OSC executive director and chief administrative officer (CAO), Maureen Jensen, stresses that, “Protecting retail investors in today’s globalized markets is critical for market confidence.” And, she notes that it has stepped its efforts in that area.
“Our increasing engagement with investors has improved our understanding of their needs and has informed how we undertake our outreach and education, regulatory policy, compliance oversight and enforcement work,” she says, noting that the OSC’s new Office of the Investor has increased the commission’s engagement with investors; and, as a result, “key issues are being discussed and acted upon,” she says.
Additionally, she says the OSC is trying to improve its communication with the securities industry. “While working to better address investor concerns, we are also improving how we articulate our expectations about investor protection to market participants,” she notes.
And, she says, the commission is seeing new ways to bolster investor confidence through enforcement. “The OSC is intensifying its enforcement presence and exploring new opportunities to safeguard both investor and market participant trust in our markets,” she says, adding that it has strengthened its co-operation with police and prosecutors. “We will capitalize on the increased opportunities these relationships offer to target fraudulent schemes that harm investors and to increase deterrence through enforcement actions.”
At the same time, Jensen addresses the subject of increasing regulatory costs, noting that improving efficiency “is a top priority” for the commission; which, she suggests, is reflected in its approaches to policy development, understanding risk, and its focus on effective resource allocation.
“We also know that regulatory change often translates into costs to market participants as they need to make process and system changes. We commit to carefully assessing the impacts of our proposed policy and operational changes,” she says.
However, notwithstanding ongoing concerns about the impact of ever-rising regulatory costs, the report indicates that the industry continues to grow. According to the report, the number of registered firms in Ontario is up to over 1,300 from 1,250 in 2010-2011; there were almost 66,000 registered individuals, up from 64,628, over the same period, and the number of public companies and investment fund issuers has risen too (from 3,300 to over 3,700 in the latter case).
Amid this continued growth, the report indicates that “the OSC must continue to improve its capacity to keep up with market developments, innovation and investor concerns.” To do this, it says it needs to build up its derivatives capacity; expand the Office of the Investor; enhance its expertise in complex products and overseeing financial infrastructure; and, continue to boost its research and data analysis capabilities.