Banks on money pile

This article appears in the October 2023 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

The Ontario Securities Commission (OSC) has been too tight-fisted with its enforcement earnings. But efforts to make better use of that money should focus on investors, not on financing the government’s pet projects.

Despite the difficulty of collecting enforcement sanctions, the OSC has managed to amass more than $120 million from penalties and settlements. Currently, that money can be used only for a handful of purposes, such as whistleblower awards, investor education and paying back harmed investors. But the provincial government has proposed expanding the permitted uses of enforcement collections to include funding the regulator’s IT projects and the work of its Office of Economic Growth and Innovation.

The proposal reflects a growing push to use money collected from enforcement for private benefit rather than public good — the self-regulatory organizations tapped their restricted funds to finance their recent merger.

Instead, the OSC should be doing more to return money to harmed investors. When that’s not feasible, the resources should be devoted to improving investor protection: funding investor advocacy, financing independent policy research on investor issues, and supporting investor education.

Investors may well benefit from funds being used to beef up the OSC’s data and analytics capabilities, thus enhancing the regulator’s ability to police markets. But the same can’t be said of funding the innovation office, which was created to promote the government’s economic policy.

To the extent that enforcement money is used to subsidize innovation, that innovation should be in the service of investor protection, which is clearly in the public sector’s purview. So, go ahead and expand the use of the OSC’s accumulated sanctions money, but focus that filthy lucre on investors.