Header graphic for print
Canadian Securities Regulatory Monitor News and Insight

Tag Archives: OSC

The State of Private Placements in Canada: OSC Publishes Update on Exempt Financings Market

Posted in Capital Markets, Exempt Market Dealers, OSC, SEC

The Ontario Securities Commission recently published a report summarizing capital raising activity by issuers in Ontario’s exempt market. Findings from the report include:

  • increased activity in 2016
  • significant participation from foreign issuers, including the U.S.
  • no reported use of Ontario’s new crowdfunding rule

In June 2017, the Ontario Securities Commission (the “OSC”) published OSC Staff Notice 45-715 2017 Ontario Exempt Market Report (the “Report”), which summarizes capital raising activity in Ontario’s exempt market (i.e. financings made other than by way of a prospectus).

The Report is a useful resource for businesses looking to raise capital from Canadian investors, including businesses … Continue Reading

Blockchain applications may be caught by Ontario’s securities law

Posted in Fintech, Industry News, OSC

The Ontario Securities Commission (OSC) has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies (DLT), such as blockchain, as part of financial products or service offerings.

The OSC emphasized that it is keen to support the innovative potential of DLT because, among other things, DLT has the potential to increase transparency and efficiencies in the capital markets. However, because of DLT’s novelty, the OSC encourages business to speak to the OSC about securities law and investor protection requirements that may apply.

The OSC has cautioned that “[p]roducts or other … Continue Reading

One Try Only: Insider Trading Appeal Reminder of Court’s Deference to Commission

Posted in Securities Litigation

The Divisional Court’s recent decision in Fiorillo,[1] upholding the findings of the Ontario Securities Commission (the “Commission”) that three traders violated the insider trading provisions of the Ontario Securities Act[2], sustained rulings by the Commission on important evidentiary and procedural issues,  and serves as a reminder that the Divisional Court generally defers to the Commission in securities enforcement cases.… Continue Reading

Ontario and Australian securities regulators become fintech friends

Posted in Fintech, Industry News, OSC

On the heels of its OSC Launch Pad initiative, the Ontario Securities Commission (OSC) has announced another first – an agreement with the Australian Securities and Investments Commission (ASIC), under which innovative fintech companies in Ontario and Australia will be able to draw upon support from the combined resources of the OSC and ASIC as such companies seek to operate in the others’ market. One of the purposes of the arrangement is to help innovative fintech companies reduce regulatory uncertainty and time to market.

To qualify for the support offered by the agreement, innovative businesses will need to meet the … Continue Reading

The OSC LaunchPad – Unveiled

Posted in Fintech, Industry News, OSC

As previously announced, the OSC has opened the OSC LaunchPad which consists of a dedicated team within the securities regulator to support Fintech businesses wishing to navigate securities law requirements.

The OSC LaunchPad will offer tailored support which can include time-limited exemptive relief to allow testing of innovative products and services.

In order to be eligible to receive support from the OSC LaunchPad, a business must meet certain criteria, including:

  • Being a new or early-stage Fintech business that has not yet started operations or is applying to the OSC for exemptive relief.
  • Having a new, innovative or significantly different
Continue Reading

Canada’s First Regulatory Sandbox for Fintech? OSC Announces Plans for “OSC LaunchPad” Innovation Hub

Posted in Fintech, Industry News, OSC

OSC chair Maureen Jensen has announced that the OSC plans to launch an innovation hub for fintech entities. “OSC Launchpad” will be the first fintech hub for a Canadian securities regulator.

Securities regulation in Canada impacts a number of fintech business models (including companies offering online advising, peer-to-peer lending, crowdfunding platforms and angel investor organizations). The OSC had also previously issued a notice on peer-to-peer lending, inviting those operating in this sector to discuss with OSC Staff and reminding prospective marketplace lenders that certain prospectus and registration requirements may be applicable to them, depending on their business model.

OSC Launchpad … Continue Reading

Tomorrow, May 18, Registrants Will Receive the OSC’s 2016 Risk Assessment Questionnaire – What Will Your Firm’s Risk Rating Be?

Posted in Exempt Market Dealers, Industry News, Investment Funds, Mutual Funds, OSC, Portfolio Managers, Registrants

For the first time since 2014, the Ontario Securities Commission (OSC) will send Ontario registrants a risk assessment questionnaire (RAQ) that must be completed by portfolio managers, investment fund managers, exempt market dealers, restricted portfolio managers and restricted dealers registered in Ontario. Registrants will receive the 2016 RAQ tomorrow, May 18.

The OSC uses data gathered through the RAQ to apply a risk ranking to firms. Firms with higher risk rankings are more likely to be targeted by the OSC for compliance reviews. As a result, it is important that the RAQ answers be considered … Continue Reading

OSC Sets Out Priorities for 2016-2017

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Enforcement, Exempt Market Dealers, Mutual Funds, OSC, Registrants

The Ontario Securities Commission (OSC) released its draft Statement of Priorities for 2016-2017. The comment period ends May 9th.

Investor Protection Priorities

Advance Best Interest Standard – The OSC will recommend and conduct consultations on regulatory provisions to create a “best interest” standard for advisors. This standard is controversial for some industry participants but the OSC is committed to it. The OSC will also  continue to focus on advisor compensation practices and identify those that are inconsistent with a “best interest” standard.

Compensation Arrangements in Mutual Funds – The OSC will regulate embedded commissions and … Continue Reading

CSA 2015 Enforcement Report Reveals Increased Regulatory Activity and Significantly Higher Monetary Sanctions

Posted in CSA, Enforcement, IIROC, MFDA, OSC

On February 23, 2016, the Canadian Securities Administrators (CSA) released its annual report on the enforcement activities of its members. Enforcement and pre-enforcement activity has increased significantly in 2015. Monetary sanctions imposed by regulators more than doubled year-over-year and regulators concluded 38% more cases in 2015 even as the number of new proceedings increased slightly.

The 2015 Results

Monetary sanctions doubled: The regulators collectively imposed the highest amount of monetary sanctions on market participants since 2009, the year their investigation into the crash of the asset-backed commercial paper market was settled. In 2015, regulators imposed $138.3 … Continue Reading

OSC Proposes Higher Financial Awards for Whistleblowers

Posted in Amendments, Compliance and Supervision, Enforcement, Industry News, OSC, Proposals, Registrants, Requests for Comment, SEC, Uncategorized

The OSC is close to adopting a proposed final version of its previously-announced whistleblowing policy (the Program). The Program would award eligible whistleblowers up to $5 million for reporting serious securities- or derivatives-related misconduct that leads to significant enforcement or settlement outcomes.

We summarized the original OSC consultation paper in a previous article. The OSC received comments on the consultation paper and also hosted a stakeholder roundtable on the proposals. Reporting issuers will want to re-examine their internal compliance and reporting systems, codes of conduct and employment agreements in light of the proposed program. Key features are summarized … Continue Reading

The OSC Overturns IIROC Panel’s Decision with Harsher Sanctions

Posted in Enforcement, IIROC, OSC

The Ontario Securities Commission (OSC) recently imposed harsher sanctions than were ordered by a panel of Investment Industry Regulatory Organization of Canada (IIROC) following a contested proceeding. The OSC’s decision has important implications in enforcement proceedings before IIROC.

The IIROC Decision (no suspension)

After a contested hearing, an IIROC Panel determined that Lucy Lukic, a registrant at an IIROC member firm, recommended off-the-book investments to her clients.[1] Lukic had recommended securities in an investment fund that was owned and promoted by her husband, a fact that was disclosed to her clients. However, the securities were sold without a prospectus … Continue Reading

New OSC Fee Rules Come into Effect April 6

Posted in Amendments, Compliance and Supervision, Industry News, OSC, Registrants

Effective April 6, the OSC is implementing amendments to OSC Rule 13-502 – Fees (the “New Rule”). While largely consistent with the basic framework under the previous version of the fee rule (the “Old Rule”), the New Rule changes the basis for the calculation of participation fees by removing the use of a “reference fiscal year”, introduces nominal increases to certain activity fees, and introduces new management certification requirements for participation fee forms.

Participation Fees

The two main types of fees charged under the Old Rule are participation fees and activity fees. Participation fees are set … Continue Reading

Mutual Fund Compensation and Reinvestment Practices Face OSC Scrutiny

Posted in Compliance and Supervision, Continuous and Timely Disclosure, Investment Funds, Mutual Funds, OSC, Portfolio Managers

The OSC recently published its 2014 Summary Report for Investment Fund and Structured Product Issuers which includes, among other topics, a summary of key OSC policy initiatives affecting investment fund issuers and highlights of 2014 continuous disclosure and compliance reviews of investment funds The report also sets out OSC Staff observations on key emerging issues and trends for mutual funds.

OSC criticizes reinvestment of distributions by “default”

Some mutual funds offer a choice between making distributions to investors in cash, or in the form of reinvested units. OSC Staff is concerned about mutual funds that set the payment of distributions … Continue Reading

OSC accepts circumstantial evidence of tipping and insider trading in important new decision

Posted in Enforcement, Industry News, OSC

In the recent Azeff[1] decision which followed a contested hearing, the Ontario Securities Commission (OSC) accepted several insider tipping and trading allegations based on “firmly established” circumstantial evidence against an M&A lawyer and four registrants. Cases based on circumstantial evidence have been successfully contested by respondents in other cases in Canada.[2]

Summary of Facts

OSC Staff alleged that, in connection with six separate M&A transactions between 2004 to 2007, a lawyer (Finkelstein) tipped his friend (Azeff), an investment adviser, and that four investment advisers (Azeff and his partner Bobrow, Miller and his associate Cheng) engaged in insider trading … Continue Reading

OSC Offers Amnesty on Delinquent Outside Business Activity (“OBA”) Submissions

Posted in Continuous and Timely Disclosure, Industry News, OSC, Registrants

One of the items that frequently vexes registered firms is keeping their “outside business activities” (“OBA”) disclosure up to date. The Ontario Securities Commission (“OSC”) regards OBA disclosure as an important means for registrants to monitor for conflicts of interest. What constitutes OBA is very broad and includes volunteer unpaid board positions or other “positions of influence”. Some registered firms send out internal reminders to individuals asking them to keep the firm’s compliance department up to date on OBA disclosure. The OBA disclosure, however, must be updated within 10 days of a change and failure to … Continue Reading

OSC Proposes Large Financial Awards for Whistleblowers

Posted in Compliance and Supervision, Enforcement, Industry News, OSC, Proposals, Registrants, Requests for Comment, SEC

The Ontario Securities Commission (OSC) is inviting comment for the next 90 days on a proposed comprehensive whistleblowing program (the Program) which would award eligible whistleblowers up to $1.5 million for reporting securities law misconduct that leads to significant enforcement or settlement orders.

Yesterday, the OSC published a consultation paper outlining the key features of the proposed whistleblowing program and seeking public input on various aspects of the proposals. During the next 90 days, the OSC will be accepting comments on the consultation paper and will host a roundtable with various stakeholders to discuss the proposals. Before … Continue Reading

OSC mulling ban on mutual fund trailing commissions for fee-based accounts

Posted in Continuous and Timely Disclosure, Industry News, Investment Funds, Mutual Funds, OSC

The OSC Staff has announced steps it will take to eliminate trailing commissions for fee-based mutual fund series when they file their next annual renewal prospectuses. In the latest edition of the OSC’s Investment Funds Practitioner, OSC Staff expressed the view that a mutual fund series intended for fee-based accounts should not also have a trailing commission embedded in the ongoing cost of the fund series. In Staff’s view, this compensation structure is inconsistent with fee-based mutual fund series because of the extra trailing charge on top of the fee. The OSC Staff maintains this result may be contrary … Continue Reading

OSC Second Guesses IIROC on Marc McQuillen Settlement Agreement and Northern Securities Penalties

Posted in Compliance and Supervision, Enforcement, IIROC, OSC

As we discussed in a previous post, the Ontario Securities Commission (OSC) rarely exercises its broad statutory discretion to interfere with and remake IIROC decisions. Last month, the OSC departed from this approach on two separate occasions.

First, in McQuillen, the OSC took the rare but not unprecedented step of setting aside as “manifestly unfair” a 2007 settlement agreement (the Agreement) between IIROC and Marc McQuillen (the Applicant). The OSC also ordered IIROC to expunge the Applicant’s related disciplinary record and to repay $25,000 in fines to the Applicant.

The Applicant entered into the … Continue Reading

Leveraging Crowdfunding: Adopting the Model at the Enterprise Level

Posted in OSC, Proposals

As noted in earlier blog posts here and here, the Ontario Securities Commission (“OSC”) initiated a consultation process in March 2014 on a proposed capital raising prospectus exemption aimed specifically at crowdfunded equity offerings (the “Crowdfunding Exemption”). This proposed exemption may allow businesses in Ontario to access capital (up to a maximum of $1.5 million in equity in any 12-month period) from a potentially large number of investors using an online “portal” platform that would be registered with the securities regulators. Currently, the OSC is in the process of reviewing public comments relating to the … Continue Reading

Registration Exemption Available for Southbound Advice of SEC-Registered Advisers Based in Ontario

Posted in Advisors, OSC, Portfolio Managers, Registration, SEC

The Ontario Securities Commission (OSC) has recently granted a five year exemption from Ontario registration requirements to an SEC-registered adviser operating from Ontario with an exclusively US client base. Kalenjin Advisory Ltd. (Kalenjin) and its Ontario-resident advising representative provide securities advice exclusively to high net worth individuals resident in the United States with respect to securities traded on trading venues outside of Canada (Foreign Securities).

Citing a supervisory memorandum of understanding with the SEC, the OSC exempted Kalenjin and its advising representative from this registration requirement, provided that Kalenjin and its representatives remain appropriately … Continue Reading

What Happens When OSC Staff Can’t Prove Its Allegations? Lessons from the Baffinland Insider Trading Saga

Posted in Industry News

Securities regulators pursuing allegations of insider trading typically allege not only that respondents have violated the statute but also that their conduct is contrary to the public interest. When a regulator fails to demonstrate a violation of the statute, what are the limits on using the public interest to punish conduct otherwise found to have been lawful? The decision of the Ontario Securities Commission (OSC) in Waheed[1]may signal the OSC’s appetite to exercise more restraint than was seen in other recent cases in determining when the public interest standard has been satisfied.

The Waheed decision also brings home … Continue Reading

OSC Policing Non-Resident Trading and Advising Activities

Posted in Advisors, Autorités canadiennes en valeurs mobilières, Enforcement, Industry News, OSC, Registration

Recently, a foreign bank settled a threatened enforcement action with the Ontario Securities Commission (OSC) based on allegations that the bank’s Toronto foreign bank representative office (FBRO) had engaged in trading and advising activities on behalf of Ontario residents without being registered or being able to rely on an exemption.  The FBRO admitted that its conduct was contrary to Ontario securities laws as well as the public interest, and agreed to make a $500,000 settlement payment to the OSC.

The OSC became aware of irregularities following a 2011 Compliance Review (the results of which are summarized … Continue Reading

Investment Fund Managers – A Regulatory Check-up

Posted in Compliance and Supervision, Continuous and Timely Disclosure, Investment Funds, Mutual Funds, OSC

The Ontario Securities Commission (“OSC”) has recently released two notices providing helpful guidance on the compliance operations of investment fund managers (“IFMs”). This guidance is contained in the 2013 annual review summary report for dealers, advisers and investment fund managers (the “Annual Report”) and a June, 2014 notice reporting on the targeted review of investment fund managers (the “June Report”).

In this post, we summarize OSC findings in its compliance reviews of IFMs as discussed in the Annual Report and June Report.

Issues respecting UDPs and CCOs

IFMs are required to maintain a control and supervisory … Continue Reading

June Citigroup Appeal Decision Reinforces OSC’s New “No Contest” Settlement Approach

Posted in Continuous and Timely Disclosure, Enforcement, OSC, SEC

Ever since raising the possibility of “no contest” settlements back in 2011, the Ontario Securities Commission (OSC) has had to contend with indications that such settlements were falling into disfavour with U.S. judges asked to approve them.

No-contest settlements became controversial in the U.S. because of a highly publicized ruling by Manhattan Federal District Court Judge Jed Rakoff who, in a landmark 2011 decision, refused to approve a no-contest settlement between the SEC and Citigroup. The Rakoff decision called into question the longstanding SEC practice of entering into cooperation settlements and generated much controversy among U.S. regulators … Continue Reading