In today’s provincial budget, Ontario’s government reiterates its commitment to a national securities regulator, but, in the meantime, pledges to propose a variety of amendments to securities laws.
The amendments would, among other things, broaden insider trading provisions, add new possible fraud offences, and boost the disclosure requirements for exchange-traded funds (ETFs).
Following on the heels of the federal government’s pledge in its recent budget to continue pursuing a possible national regulator, and, if that fails, to take jurisdiction for matters of national importance (such as systemic risk), Ontario’s government says in its budget that it “remains prepared to work with the federal government and other interested provinces to establish a common cooperative securities regulator.”
It sketches out a vision for such a body, stressing that it would have to put its head office in Toronto; include a board that governs the new regulator and is accountable to a council of participating ministers; a voting structure that “recognizes the significant role of jurisdictions with major capital markets”; and, provides regulation that reduces costs for issuers and investors amid a more modern and responsive regulatory environment.
“This framework would offer real benefits to businesses raising capital and to investors, and it would enhance Canada’s international reputation for excellence in financial regulation,” it says. “In the meantime, the government will explore options to work with the federal government to ensure the effective and efficient regulation of systemic risks in Canada’s capital markets including risks that arise from derivatives markets.”
Notwithstanding possible changes to the regulatory structure, the government says that it also plans to propose a variety of changes to update and strengthen securities laws, including legislative amendments that would: clarify the procedures for the Ontario Securities Commission (OSC) to share investigative information with other regulators and law enforcement authorities; add new offences for attempted market manipulation and attempted fraud; and, expand and clarify the insider-trading provisions in the Securities Act.
Additionally, it says that, following consultations along with the OSC, the government plans to propose further changes updating the disclosure requirements for ETFs “to provide plain language, concise and comparable disclosure to investors that is more consistent with the requirements that apply to mutual funds.”
It also suggests that it may suspend the limitation period for secondary market civil liability suits while leave to proceed is being sought. It may also update the early-warning reporting, and related requirements, for takeover bids to provide more transparency; expand the insider-trading and self-dealing provisions, including their application to investment funds; and, broaden the definition of ‘market participant’.
The government indicates that it also aims to enhance the OSC’s capabilities by: increasing the scope of its compliance reviews; expanding its role in addressing financial stability and systemic risk; giving the commission more discretion to impose requirements regarding the form of information that is provided to the regulator; and, broadening the availability of freeze orders.
“These changes would help strengthen Ontario’s securities regulatory framework, and allow the OSC to become a more efficient and responsive regulator,” it says.
And, in light of Canada’s G20 commitments, including pledges to reform regulation of over-the-counter derivatives markets, the government says it will also consider “how best to ensure timely action so that derivatives markets in Ontario are regulated appropriately and remain internationally competitive”.
It also notes that ensuring access to capital for businesses is a priority for the government, and it says it “looks forward to the OSC’s recommendations on debt and equity crowdfunding and other potential ways to enhance access to capital markets for businesses of all sizes and stages of development, while maintaining appropriate investor protections.”