(April 25 – 16:00 ET) – Ontario will follow the lead of the U.S. and push for fair disclosure when the Ontario Securities Commission releases a policy paper for comment on selective disclosure this spring.

David Brown, chairman of the OSC, made the announcement in a speech he delivered to an Investment Funds Institute of Canada breakfast April 23 in Toronto.

Brown connected the need for fair disclosure to recent industry trends, namely do-it-yourself investing and the empowerment of the individual investor.

Recent changes to suitability rules, including the know-your-client rule, have led to the need for changes in disclosure, said Brown. “Investors who want execution, not advice, don’t need that part of the safety net. But what new risks are investors exposed to — and what safety net are they fairly entitled to? If they’re making their own investment decisions, one thing they certainly need is equal access to information,” he said.

The SEC recently introduced regulation FD into the U.S. market, putting the onus on U.S. corporations to disseminate information to all market participants at the same time.
The policy statement to be published later this spring will suggest practical steps companies can take to ensure they are meeting all regulatory requirements with respect to selective disclosure in Ontario.

“In a market in which information is the most valuable commodity, all investors have to be brought into the loop,” said Brown.

He also called on the settlement industry to keep up with the U.S. in terms of implementing a T+1 settlement cycle.

According to Brown, between 1990 and 1999, the volume of securities traded in Canada grew by 350%, while the value of those securities grew by 750%.

That means the value of securities outstanding at the end of a typical trading day is anywhere between $100 billion and $150 billion.

“That’s a lot of risk, [and for] investors, that’s a lot of capital,” he said. “The time lag is especially important in an economy that seems to change by the hour.”

Because Canadian broker dealers will bear the cost of installing the technology necessary for implementing T+1, they also hold the future of the Canadian clearing and settlement industry in their hands, he added.

“If Canada were to stand still while the U.S. industry shifted, the result would be higher settlement costs on this side of the border, opening the risk that Canadian companies would move their clearing and settlement to the U.S.”

Brown’s speech marked the beginning of Investors Education Week, and he outlined some of the steps the OSC is taking it educate investors.

One focus has been on online investing scams. The OSC found it’s not difficult to make money on the Internet.

The OSC recently launched a site, built for $2,000, called NoRiskWealth.ca, that touted no-risk returns of 30% percent on an investment products called “international debentures,” traded on a “secret” exchange.

The OSC launched the site in January, advertised it in newspapers and talked it up in chat rooms, with no mention that it was an OSC initiative.

The good news, Brown said, was OSC investigators (who had not been told about the scam) picked it up in four days. The bad news was the site received 16,000 hits, 100 requests for information and offers from 10 people ready to invest a total of $50,000.

One part of Brown’s speech was received with some puzzled looks. Talking about the focus of Investor Education Week, he noted that two groups would be targeted: adult mainstream investor and young people.

By young people Brown meant very young people. Along with a television program the OSC has prepared for teenagers, “We’re directing our message to children even younger than that,” said Brown. “Today’s first graders will become tomorrow’s consumers and investors.”

The OSC will run joint programs with publications such as Toronto-based OWL magazine, that will see cards inserted in the magazine explaining the power of compounding interest.
“We’re not ignoring the preschoolers,” Brown said. “We’re giving them a chance to get an early feel for what investment is about,” he said.