The Ontario Securities Commission has announced its intention to create a new body to solicit investor input on regulatory policy.

The OSC indicated Tuesday that it is planning to establish an Investor Secretariat.

In a submission to the provincial Standing Committee on Government Agencies, indicated that it is “actively engaged in a rigorous exercise to identify the most effective ways to obtain investor input and to address investor interests”. To that end, it cited plans to establish an Investor Secretariat “as a coordinating body within the commission to better identify and address issues of concern to investors, particularly policy implications that regulatory initiatives may have on investors, and to better promote internal awareness of investor issues being developed at the OSC.”

“As part of this new Secretariat, we are also assessing the best way to encourage and facilitate investor input recognizing the challenges investors face in commenting on regulatory proposals,” it added.

The move comes in response to criticism that the commission, and indeed the entire provincial regulatory system, has received about the lack of mechanisms for investor input. In response to similar criticism at an investor town hall several years ago, the OSC created an investor advisory committee, but it was abandoned after its initial two-year term expired.

Since then, the OSC has been working with the self-regulatory organizations to better solicit investor input. Yet the criticism has not abated, and the federal expert panel on securities regulation recommended that a new national regulator provide better mechanisms for investor involvement, and greater access to compensation when they suffer losses due to misconduct.

The OSC submission addresses that issue, too. “Although significant efforts have been made and continue to be made to improve the complaint handling and dispute resolution mechanisms in Canada, we continue to explore options to compensate investors more quickly and with less cost,” the OSC said in its submission, although it didn’t announce any concrete changes in that area. “We also believe that many of the recommendations of the Expert Panel on Securities Regulation relating to complaint handling and the compensation of wronged investors merit further consideration,” it said.

In addition, David Wilson, chairman of the OSC, indicated in his prepared remarks that the financial sector remains strong in Canada, despite the effects of the global financial crisis. “We continue to monitor events and remain alert to developments in the securities markets, watching for signs of improper conduct,” he said. “At this time, it’s especially important to increase our vigilance to fulfill our mandate – to provide protection to investors, and to foster confidence in the integrity of the capital markets. And we continue to be confident that Ontario and Canada have a sound financial sector and sound regulatory framework.”

Nevertheless, the OSC submission concedes that “the enforcement framework in Canada is not as effective as it could be because we have too many regulatory authorities — all the provincial and territorial regulators, law enforcement and federal and provincial justice departments.”

It favours a move to a single regulator, but notes that regulators also need to ensure that it has sufficient tools and powers. “As technologies improve, investment products become more sophisticated, and markets across the globe become more integrated, regulators need to keep up,” noted Wilson. “Because those who would abuse investors are also finding new ways to skirt or breach regulations.”

He pointed out that the OSC is working on initiatives, some of which will require legislative amendments, including: a framework for regulatory oversight of credit rating agencies; an improved ability to preserve assets during an investigation; a broader definition of illegal insider tipping; and, clarification of the OSC’s jurisdiction over companies in the U.S. over-the-counter market that engage in manipulative or illegal activities aimed at Ontario investors.

“We will continue to monitor our enforcement arsenal, to make sure that we have the means at our disposal to foster the integrity of our capital markets,” he said.

IE