New OSC boss renews call for single regulator, urges hedge fund transparency
From the Canadian Press
11/17/05 3:27:00 PM
TORONTO (CP) - The new chairman of the Ontario Securities Commission has renewed his predecessor's call for a single Canadian regulator of financial markets.
David Wilson also said Thursday in his first public speech as head of Canada's biggest securities commission that the OSC will be pressing hedge funds to provide more information about their workings and will be seeking tougher penalties against thieves, fraudsters and insider-trading violators.
"We need a common securities regulator in Canada to improve both the efficiency and attractiveness of our capital market," Wilson, who took over Nov. 1 from David Brown, told an OSC conference.
Reprising a well-worn theme, he added: "Any change must be pursued and implemented in a co-operative manner, taking into account regional needs."
The idea of a national regulator, supported by the Ontario and federal governments as well as the OSC, has for years run up against objections from Quebec, British Columbia and Alberta, which fear domination by Toronto.
In the hedge fund sector, Wilson said recent scandals, notably the collapse of Portus Asset Management of Toronto, have highlighted the need for greater transparency.
He noted that Canadian hedge funds, extending beyond their former clientele of wealthy investors who can take care of themselves, have exploded in value from $4 billion to over $30 billion in five years, and because of their high-velocity trading may account for nearly one-third of market activity.
They provide liquidity and drive efficiency but "we must consider measures designed to ensure that hedge fund managers provide fair, full, accurate and timely information to their investing clients," Wilson said.
"And we must consider the steps we should take to improve transparency regarding fees and risks within the often complex provisions of their financial maze."
Wilson, 60, formerly CEO of Scotia Capital, also noted that the OSC faces a decision on whether to impose a requirement on Canadian corporations paralleling Section 404 of the U.S. Sarbanes-Oxley Act, which forces companies to implement and document internal controls on their financial reporting.
Canadian enterprises with securities listed on U.S. markets already must comply with SOX 404, but "about 1,100 Canadian companies, with market cap of half a trillion dollars, are awaiting our decision," Wilson observed.
He gave no indication of what the commission will decide, but noted that for many companies SOX 404 "could constitute a huge burden, involving layers of costs," and if these costs outweigh the benefits for investor confidence, "then we will have to find a unique Canadian approach."
On the enforcement front, "we must continue to close the historic gap between securities regulation and criminal law enforcement," Wilson said.
And penalties must be toughened so they are regarded as a real risk - not merely "an opportunity to persuade violators to reform their ways after they have been caught."
Last week, the stocks regulator charged two men with insider trading of shares in Agnico-Eagle Mines Ltd., a Toronto-based gold miner.
Barry Landen, who was the miner's vice-president of corporate affairs until last December, was charged with one count of insider trading and one count of tipping. Stephen Diamond, a chartered accountant, was charged with one count of insider trading.
Those charges come just weeks after the trial of former Toronto investment banker Andrew Rankin wrapped up, ending with a six-month jail sentence for Rankin after Canada's first tipping conviction. Rankin, who was cleared of 10 insider trading charges, was found guilty of sharing insider stock tips with a friend prior to 10 major Canadian business deals.
Observers of that case speculated that successful tipping charges and the jail sentence would spur the OSC to take on more tipping and insider trading cases, which are notoriously difficult to prove.
© The Canadian Press, 2005
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