The response from the Ontario Securities Commission to an individual who urged it to revamp disclosure requirements left him — and me — with the impression that the OSC couldn’t care less about investor protection, which is supposedly the reason for its very existence.

The investor asked regulators to require that disclosure information be sent to investors unless they requested otherwise. Under the current rules, investors must expressly ask for delivery of annual and interim financial statements and reports if they want to receive them.

But in defending its negative option policy, the OSC told the investor somewhat sanctimoniously that regulators are there to serve “their stakeholders” and that in this particular matter they are “obliged to consider the views of all stakeholders with an interest in the process — issuers, intermediaries, their transfer agents and advisors, as well as security holders.”

The OSC’s approach to disclosure is extremely troublesome and fuels the concern that regulators are falling far short of their investor protection mandate. This is not the first time this comment has been made. It has been a recurring theme whenever and wherever the OSC’s activities are scrutinized by investors, investor advocates, the media, the Wise Person’s Committee, the Five-Year Securities Act Review Committee, the Standing Committee of the Legislature on Finance and Economic Affairs, and the Investors’ Town Hall Meeting.

The OSC’s stakeholder response offers some clues to why investor protection seems to get short shrift from regulators. It is interesting that regulators place “security holders” at the end of the list of their stakeholders. One has to wonder just who it is the regulators are trying to please and why. One also has to observe that the so-called “stakeholders” — issuers, intermediaries, their transfer agents and advisors — are there to serve the interests and needs of security holders. If it were not for the security holders, there would be no need for these other stakeholders.

The OSC’s response indicates that regulators have indeed lost sight of their investor-protection mandate and the need to foster fair and efficient capital markets, and confidence in them to carry this out.

Disclosure is one of the core tools for fulfilling the regulatory mandate. Disclosure and measures designed to increase investor know-ledge and awareness are essential elements in reducing the knowledge gap between those who know and those who do not. The onus should be on ensuring that investors receive meaningful information and actual delivery should be the default option.

The fact that information can be accessed electronically on public and private Web sites is no excuse for not requiring that actual delivery of meaningful information to investors is the default option.

Regulatory policy needs to give investors a meaningful choice and allow the well-recognized phenomenon of behavioural inertia to work for, rather than against, the investor. Balancing the commercial interests of stakeholders has no place here. Regulators should be troubled by the low level of responses from investors who say they want to receive disclosure information. Are they too willing to attribute this to investors having made a reasoned decision that they do not want or need this information?

Perhaps they should look at other causes including behavioural inertia. For example, how readable is the material that is being sent to people? A lot of it is in very small, faint and unreadable print produced on poor-quality paper. This is particularly true of the Management Reports of Fund Performance issued by mutual funds. At least one fund management company has buried the request to receive future MRFPs and to be added to financial disclosure lists at the end of such documents, giving investors no clue that the form is there or what the consequences will be of not completing and sending it back.

In this environment, it is difficult not to conclude that neither the regulators nor the industry are addressing investors’ needs. IE