Harmed investors will soon have another route to potentially recover their losses, as the Ontario Securities Commission (OSC) adopts new rules to make it easier for the regulator to return disgorged funds to investors.
The OSC has published final rules to implement a new statutory framework for returning such funds, helping investors who have suffered losses due to misconduct. These funds are collected under disgorgement orders imposed by the Capital Markets Tribunal or the Ontario Superior Court of Justice.
The new rules are slated to take effect in late summer, the OSC said.
This development follows amendments passed by the Ontario government in autumn 2023 to securities and derivatives laws, enabling the regulator to create rules and streamline its ability to govern the distribution of disgorged funds. The legislation sets out requirements for how disgorged money is to be handled and returned to harmed investors.
In summer 2024, the OSC published its rule proposal for comment. As a result, the regulator says the final rules were crafted following “careful consultation with stakeholders,” and that “this new statutory distribution framework aligns the OSC with other Canadian and international regulators with similar distribution frameworks.”
Once the rules come into force, the regulator will launch a new section on its website that lists disgorgement orders, enables investors to register for distributions, and provides status updates on outstanding orders. Investors will also be able to learn how to submit claims.
“The new distribution framework provides investors who are harmed by misconduct that results in a disgorgement order with a streamlined and transparent framework to recover parts of their losses from amounts collected by the OSC,” said Naizam Kanji, general counsel and executive vice-president, legal and governance, at the OSC, in a release.
“While the OSC will also continue using no-contest settlements and receiverships to return money to harmed investors in appropriate cases, this new process is an important addition to the OSC’s investor redress toolkit,” he added.