Rethinking Enforcement and Litigation in Ontario Securities Regulation
Abstract
The Ontario government has recently made changes to provincial securities law that are aimed at more effective enforcement. For example, statutory civil remedies are now available to investors in actions involving misrepresentation or inadequate disclosure in the secondary market. A broader range of sanctioning options has also been made available to the Ontario Securities Commission. The author explores the factors contributing to these developments, identifies recent controversies surrounding the Commission's enforcement activities, and evaluates the effectiveness of different approaches to enforcement. The author reviews policy issues surrounding enforcement through public, criminal and quasi-criminal sanctions, as well as civil remedies, and places these issues in the context of academic legal debate. She considers administrative law principles in the context of issues in securities enforcement, such as apprehension of bias, “judicialization" of Commission hearings, and the diversity of enforcement efforts across Canada. She then considers whether regulations should be oriented to deterring violations or creating incentives for compliance. She notes that current incentives to comply with securities regulations may have little influence on employee and firm behaviour in a competitive business environment. Enforcement mechanisms aimed at deterrence may therefore be less effective than those seeking to encourage compliance with regulations. Since the provisions recently added to the Ontario Securities Act are aimed at deterrence rather than compensation, she then discusses whether private enforcement mechanisms, such as the statutory civil remedies available under that Act, are preferable to public enforcement mechanisms. The author concludes that public and private mechanisms may be interdependent and could together achieve effective securities regulation.