Critics of the Ontario Securities Commission may have thought they’d scored a victory when Ontario’s standing committee on finance and economic affairs recommended major changes to securities regulation in 2004, including a new mechanism for investor restitution and better legislative oversight. Now, the standing committee on government agencies is repeating those same recommendations, exposing the futility of the critics’ initial efforts.

At the end of March, the SCGA published a report detailing the results of its OSC review. The report includes 12 major recommendations for the regulator, the government and the legislature to improve securities regulation in Ontario.

Some of those recommendations speak directly to the fallout from the global financial crisis and, in particular, the failure of the market for non-bank-sponsored asset-backed commercial paper in late 2007. Other recommendations propose novel changes, such as the appointment of an investor representative to the OSC’s board. And several of the SCGA’s recommendations could have been cribbed directly from the 2004 SCFEA report.

One of the unintended consequences of these reviews is that they highlight just how ineffectual these oversight mechanisms are. The government and the legislature — by rousing themselves every few years to review what securities regulators have been up to, and finding their performance lacking — reveal serious failures in the effort of overseeing regulators and holding them accountable.

For one thing, neither the government nor the legislature are even fulfilling their existing, modest oversight responsibilities. The 2004 SCFEA report found the quality of legislative oversight of the OSC to be “unacceptable.” The report called on the government to review that oversight and that, at a minimum, the OSC’s annual report should be referred to a government committee for scrutiny.

The securities legislation was amended to empower a committee to carry out reviews of those annual reports — the same SCFEA that characterized the existing oversight as unacceptable was supposed to do the job. But, in practice, this has never happened. As a result, the 2010 SCGA report is now calling on the SCFEA to start using its power to review the OSC’s annual reports.

The government hasn’t been doing much better. Back in 2004, the SCFEA also recommended that the five-year review committee (which is supposed to be appointed to review regulation every five years) be struck by 2007 — but that committee has not been reconstituted.

All of this goes to the heart of why many of the perceived fundamental problems with securities regulation never seem to be properly addressed: there’s a pervasive lack of accountability for securities regulation, from the regulator, government and the legislature.

If there’s no authority demanding that proposals be taken seriously, they’re unlikely to be acted upon.

A legislative committee can make all the recommendations it wants. In 2004, the SCFEA called for the creation of a new system of inves-tor restitution, a review of self-regulation and the separation of the OSC’s adjudicative function, among other things. Yet, these major recommendations have never been addressed.

The latest SCGA report proposes its own share of major reforms, but without a mechanism of effective accountability, it’s hard to have much confidence in their future. Indeed, the report itself reveals just how hopeless the current system has become by suggesting that the OSC improve its own accountability.

In the SCGA’s examination of the OSC’s handling of the ABCP market’s seizure, the report suggests the regulator behaved more like a bystander that didn’t want to get involved and not enough like a cop willing to jump in to defend the public interest. As a result, the SCGA report calls on the regulator to “reassess the way in which it exercises its public-interest jurisdiction, with a view to improving the commission’s effectiveness and accountability.”

Although it’s fair to ask the OSC to consider being more activist in the future, accountability has to come from above — not from within. Until it does, securities regulation is doomed to remain a neglected area in public policy.

In the meantime, the SCGA report criticizes the way the OSC handled the ABCP crisis, noting the Investment Industry Regulatory Organization of Canada took the lead in responding. The report says that may make sense in normal circumstances, but not when the world’s financial markets are in such turmoil: “It is important that the agency charged with protecting the public interest be seen to be taking a leadership role when there is a major disturbance in the market that threatens the interests of retail investors.”