OSC proceeding with no contest settlements

When the commission first proposed these ideas, the most controversial among them was the idea of allowing respondents to settle allegations without admitting to any misconduct. The OSC held a policy hearing to consider the issue last year after the initial public comment period revealed sharp divisions within the legal community over whether to introduce no-contest settlements.

These sorts of deals are common in the United States, but the proposal to allow these sorts of settlements in Canada was opposed by investor advocates and plaintiffs counsel, who argued that it will make it tougher for harmed investors to succeed in civil suits, among other objections. Conversely, lawyers who often act for defendants to regulatory hearings have generally endorsed the idea as a way to speed up proceedings.

The OSC notes that the commission has indicated to enforcement staff that it is prepared to consider approving these sorts of settlement agreements that don’t include formal admissions of misconduct. “Ultimately, any decision to accept or reject a proposed no-contest settlement would be made by a commission hearing panel considering the particular circumstances,” it says.

Additionally, it says that the commission also supports the other various efforts designed to enhance the effectiveness of enforcement, including: adopting a new program for explicit no-enforcement action agreements; a more explicit process for self-reporting violations under the credit for cooperation program; and, enhanced public disclosure of the credit respondents receive for their cooperation during enforcement investigations.

“These new tools will help staff strengthen the presence and effectiveness of the OSC’s enforcement program to protect investors and promote public confidence in the capital markets,” said Tom Atkinson, director of enforcement at the OSC.

“The four initiatives will potentially allow us to resolve enforcement matters more quickly and issue more protective orders earlier. When heightened accountability from respondents is paramount, we will continue to seek admissions as part of any proposed settlement agreement,” he added.

The OSC notes that it has not yet decided whether to introduce a new whistleblower program that would reward tipsters for information, as U.S. regulators and Canadian tax authorities have recently done. “Staff is continuing to consider the introduction of a whistleblower program under which monetary incentives would be paid to persons who provide the OSC with actionable information about misconduct in the marketplace,” it says.