Modernizing enforcement

Proposals in this section are made assuming a separation of the adjudicative and regulatory functions of the OSC.

34. Consider automatically reciprocating the non-financial elements of orders and settlements from other Canadian securities regulators and granting the OSC a streamlined power to make reciprocation orders in response to criminal court, foreign regulator, SRO, and exchange orders

The Taskforce’s proposed changes to reciprocation under the Securities Act would help ensure that respondents who have been sanctioned by other regulators, courts, SROs or exchanges are kept out of Ontario capital markets much more promptly and efficiently than they are currently. These changes would enhance investor protection and the integrity of the capital markets. Similar automatic reciprocation provisions have been enacted in all Canadian provinces and territories except Ontario, Newfoundland and Labrador, and Nunavut.


The proposal to automatically reciprocate sanction orders resulting from the contested hearings and settlements of other Canadian capital market regulators means that such orders would apply in Ontario as if they were made by the OSC, without a separate OSC order. The Taskforce does not propose to distinguish between orders resulting from breaches of capital markets laws or conduct contrary to the public interest. Automatically reciprocated orders could, among others, impose limitations on or suspension of registration, or limitations on being an officer or director of an issuer. Cease trade orders would also be automatically reciprocated.

Orders by courts, foreign regulators, SROs and exchanges would be reciprocated by the OSC on a streamlined basis, without respondents being granted an opportunity to be heard.

The proposed changes are predicated on the idea that a fair hearing has already been provided, making an OSC hearing unnecessary. Reciprocated orders or settlements would not have automatic effect in Ontario unless the OSC has the power to make a similar order or settlement. Monetary sanctions or voluntary payments agreed to in a settlement would not be reciprocated.

Do commenters think that there are certain types of orders that should be excluded from this proposal and should not be automatically reciprocated or not be reciprocated by the OSC without a requirement to provide a hearing, and, if so, which types of orders? What are the potential concerns with such proposed changes and what safeguards should be put in place to ensure fairness of the process for affected individuals, companies or other entities? For example, the Taskforce is considering requirements such as: the OSC assessing whether foreign jurisdictions offer fair hearings, and if circumstances warrant, permitting a respondent an opportunity to be heard; the publication of all reciprocated orders by OSC; and the OSC providing a clarification right (in lieu of an appeal right) for automatically reciprocated orders.

35. Improve the OSC’s collection of monetary sanctions

Collecting monetary sanctions (administrative penalties, disgorgement, costs and voluntary payments agreed to under the terms of a settlement) has and continues to be challenging for all regulators including the OSC, especially where the company or individual sanctioned is not a market participant. In 2019, for the monetary sanctions resulting from settlements and contested hearings ordered during the year, the OSC had an average collection rate of only 34.9 per cent, with 0 per cent collected from non-market participants in contested hearings. A common tactic used by those who commit fraud or those trying to avoid payment of amounts ordered is to shield their assets from recovery by the OSC by inappropriately transferring them to friends and family at a price below fair market value. Another challenge with collections is that the OSC has limited tools to incentivize payment of monetary sanctions.


The Taskforce proposes to give the OSC additional tools to help improve the OSC’s collection of monetary sanctions. What tools do commenters think would be appropriate to help improve the OSC’s collection rate for monetary sanctions? The Taskforce is putting forward the proposals below for consideration by commenters. These proposals are based on recent amendments to the British Columbia Securities Act. Please let the Taskforce know of any concerns with these proposals or if commenters have other recommendations about how to improve OSC’s collection of monetary sanctions.

  1. The Taskforce proposes giving the OSC more effective powers to freeze, seize or otherwise preserve property, including property transferred to family members or third parties below fair market value

Currently, when applying to the Superior Court to continue the application of a freeze direction issued by the OSC, the OSC must establish some evidence that frozen funds or property were obtained through a breach of Ontario securities law by the target of an investigation. The Taskforce proposes that the OSC also be permitted to freeze any assets, starting at the investigation stage, by establishing that the assets are being preserved in order to return money to harmed investors or to satisfy a possible disgorgement, monetary sanction, or costs order.

The Taskforce also proposes giving the OSC the clear power to freeze and seize assets that were transferred below fair market value to family or third parties using the tests for continuing a freeze direction that currently exist, as well as the alternative conditions outlined above; and providing the OSC with expanded powers to investigate transfers of property to, or receipt of property from, family or third parties. Transfers to family could potentially have occurred before the misconduct at issue in the investigation had begun. OSC’s exercise of its freeze and seizure powers would continue to be through court orders.

In addition, the OSC would, subject to obtaining court authorization, have the power to dispose of frozen assets to retain value prior to a hearing and any potential monetary sanctions being ordered. There would no longer be a limitation period for collections and the OSC’s writs of seizure and sale would no longer expire.

Given the important expansion proposed to preservation orders and collection powers, there would be a right to a hearing in front of the OSC tribunal to request a clarification, variation or revocation of a preservation order (as is currently the case for freeze directions).

What are the concerns with the proposed significant expansion of the OSC’s preservation order powers or any part of the proposal? Would commenters think some parts of the proposal are too far-reaching and should be scaled back or removed from the proposal? For example, should certain types of assets, such as real property or vehicles, be excluded from the proposal to give the OSC power to order the disposal of frozen assets to retain value prior to a hearing or any monetary sanctions being ordered? Should certain transfers to third parties or family members below fair market value be excluded, such as transfers made for legitimate tax or estate planning purposes? In what circumstances should a person affected by a preservation order be able apply to the OSC to have it revoked?

  1. The Taskforce proposes limiting access to drivers’ licences and licence plates for monetary sanctions owing to the OSC

The Taskforce proposes that Ontario would not issue or renew a driver’s licence or licence plates to individuals who have failed to pay the administrative penalties, disgorgement or costs ordered by the OSC, or fines, or restitution or compensation ordered by the court. As many individuals drive, this proposal is aimed to strongly incentivize payment and increase the OSC’s sanction collection rates.

What are the concerns commenters would have with the proposal to limit access to drivers’ licences and licence plates? Would this proposal be an appropriate way to incentivize payment?

36. Create a prohibition to effectively deter and prosecute misleading or untrue statements about public companies and attempts to make such statements

There are cases where a series of unsubstantiated statements are made publicly for financial gain, and misleading or false information is introduced into the market to intentionally or recklessly affect the share price of public companies and influence the investment decisions of investors. Such schemes are sometimes referred to as “short and distort” campaigns that profit from falling share prices or as “pump and dump” schemes that profit from increasing share prices. The advent of technology in recent years has changed the nature and tactics of these schemes such that they can now easily have a wider audience and sustained campaigns with many misleading or false messages or statements over a prolonged period of time e.g., on social media using multiple tweets. British Columbia recently enacted legislation that will help combat such abusive schemes.


The Taskforce proposes creating a new and specific prohibition on making misleading or untrue statements about public companies to make it easier for the OSC to effectively deter and combat abusive practices intended to affect share prices or influence investor decisions, such as “short and distort” campaigns and “pump and dump” schemes. The prohibition would also cover attempts to make “misleading or untrue statements about public companies” to address the abusive practices that may not be successful, but which are still egregious.

What concerns would commenters have with this proposal? How can we ensure that the proposed prohibition does not inadvertently capture analysts who provide their researched views on reporting issuers’ securities or reputable activist short sellers whose public comments can be important for price correction of a public issuer’s securities?

37. Increase the maximum for administrative monetary penalties to $5 million

After holding a hearing, the OSC can order a person or company who has not complied with Ontario securities law to pay an administrative penalty of not more than $1 million for each failure to comply. The amount has not been increased since 2003. Certain sizable registered firms or other very large entities would not be deterred by a $1 million sanction because, for example, $1 million could be an acceptable cost of doing business for such firms.


The Taskforce proposes increasing the maximum sanction to $5 million to modernize the Securities Act by adjusting for inflation and scale of Ontario business, aligning with similar SRO sanctions for similar breaches, and more effectively deterring or penalizing misconduct for larger firms or more egregious conduct.

Would commenters think that such a significant increase to the maximum for administrative monetary penalties is appropriate? What are the potential concerns with such an increase? Should the maximum amount differentiate between firms and individuals? Should there be differentiation for certain types of infractions (for example, in the U.S., certain maximum penalties are higher for "intentional or knowing conduct" or "repeated instances of negligent conduct")? How should the enforcement monies collected by the OSC be used to both protect investors and foster capital formation and competition? Should monetary penalties for firms be determined in proportion with the revenue of the firm?

38. Strengthen investigative tools by empowering OSC Staff to obtain production orders and enhancing compulsion powers

To enhance investor protection, the OSC’s investigative teams need modernized tools to obtain necessary documents and data to combat white collar crime and other breaches of Ontario securities law. Enforcement investigations require tools to be effective in the digital age where businesses and individuals predominantly have documents and data stored on servers in the “cloud.” British Columbia recently enacted legislation that will help address these investigation challenges.


The Taskforce proposes that OSC enforcement investigators should have a clear power to compel any firms and individuals (via summonses in administrative investigations), as well as firms and individuals that are not targets of investigations (via production orders in quasi-criminal investigations), to “find and gather” and “prepare and produce” relevant documents, records, or electronic data to deliver to the authorized OSC investigator in the form and within the timeframe requested by the investigator (where those firms and individuals have possession or control of that information or data).

Having production order powers available in the securities context will align the investigative tools available to investigators for both quasi-criminal and Criminal Code of Canada investigations. Similarly, enhancing the compulsion powers in s. 13 of the Securities Act will align the investigative tools available to investigators for both administrative and quasi-criminal investigations. These powers will provide the OSC with impactful ways to advance investigations.

In respect of production orders, a person that is served with a production order must produce a required document even if production may tend to incriminate that person or subject that person to a proceeding or penalty. However, the evidence that is produced via this production order cannot be used against the person producing the documents, unless the person falsified the documents or misled or lied to the OSC when producing the documents.

What are the potential concerns with either of these significant changes to the OSC’s investigation powers of granting the OSC production order powers or enhancing the OSC’s current compulsion powers? How can these concerns be mitigated? What safeguards or limits should be put in place as part of the OSC’s use of these proposed expanded investigation powers?

39. Greater rights for persons or companies directly affected by an OSC investigation or examination

The Taskforce has heard from stakeholders that there is not a clear process for the adjudication of disagreements and disputes arising in the course of the OSC’s investigations and examinations. The Taskforce has also heard that persons or companies subject to OSC summonses would benefit from more transparency about the entire process.


The Taskforce proposes greater statutory rights for persons or companies directly affected by an OSC investigation or examination. Such persons or companies should be able to apply to an OSC adjudicator for clarification of orders relating to investigations or examinations and possibly summonses.

What are the concerns with such a proposal? Is there a risk that such a proposal would permit the subject of an investigation to participate in determining how the regulator can gather information or what witnesses the regulator may examine? What potential impact would this proposal have on the OSC’s ability to conduct joint investigations or otherwise cooperate with Canadian and international regulatory partners? Would this unduly delay investigations and examinations? Should this apply both to summonses and to investigation and examination orders? Should the proposed OSC adjudicator clarification power include both the power to vary or to revoke the orders or the summonses?

The Taskforce also proposes that persons or companies subject to OSC summonses have more transparency about the entire process. The Taskforce understands that it is OSC staff’s practice to provide notice to persons or companies that have been the subject of an investigation when the investigation is closed and, as a part of a new pilot program, to facilitate an examination by providing certain documents to the persons served with a summons.

What are commenters’ views on the following practices and proposals for procedural changes?

  • Should any changes be made to the process for providing notice to those who were served with an OSC summons when an investigation (or a defined subset of it) has been concluded?
  • Should certain documents be provided to persons served with a summons to attend for an oral examination to facilitate the examination?
  • Should there be an opportunity for persons and companies served with a summons to comply by initially producing a subset of responsive documents and to meet and confer with OSC Staff, with a view to attempting to refine or expedite the required production and timeline for production?

40. Address concerns regarding the OSC’s use of contempt proceedings related to investigations and potential creation of offences for obstruction, including non-compliance with a summons

Stakeholders have brought to the attention of the Taskforce that they are concerned with the OSC’s use of contempt proceedings as part of its investigations. There should be a reasonable opportunity for market participants to contest the possible use of contempt proceedings when attempting in good faith to engage in the investigation process. One reason for the OSC’s use of contempt proceedings relating to investigations is the absence in Ontario of an obstruction offence under the Securities Act, while such offences exist in the capital markets legislation of other provinces.

A related proposal being considered by the Taskforce is to add offences for obstruction and non-compliance with a summons to the Securities Act so that the OSC would have additional tools other than contempt proceedings to address cooperation issues in investigations.


The Taskforce proposes that OSC Staff be required to obtain leave from the OSC tribunal before it is allowed to initiate contempt proceedings related to investigations. The Taskforce is also seeking feedback from commenters on the proposal to add an obstruction and a non-compliance with a summons offence to the Securities Act.

What are the concerns with such proposals? Currently OSC Staff exercise prosecutorial discretion to enforce a summons by bringing a contempt application to the Superior Court. Should that discretion be limited by requiring OSC Staff to obtain leave from the tribunal first? Should the proposed requirement to obtain leave to initiate contempt proceedings be done in proceedings that are closed to the public? Should the Securities Act be amended to create new offences for obstruction and non-compliance with a summons? If so, are there any benchmarks or parameters that should be engaged to ensure that a reasonable time is given for complying with a summons?

41. Broaden the confidentiality exceptions available for disclosing an investigation and examination order or a summons

Generally, a person or company shall not disclose the content of an investigation or examination order or a summons except when the disclosure by a person or company is to:

  • the person’s or company’s counsel; and
  • the person’s or company’s insurer or insurance broker after meeting criteria set out in the Securities Act.

Some stakeholders have indicated that additional disclosure exemptions should be permitted to reduce the regulatory burden and time spent filing a formal application and participating in a hearing process when seeking permission to disclose.


The Taskforce proposes to incorporate additional confidentiality exceptions in the Securities Act to permit disclosure under expanded circumstances. This should be done while preserving the appropriate balance between not interfering with OSC investigations and permitting the earlier involvement of or notification to all the appropriate parties in an investigation.

Would commenters consider the expansion of confidentiality and disclosure exceptions to be appropriate? Please provide feedback on who these exceptions should cover - the Taskforce would appreciate your views in particular about providing exceptions for disclosure of an investigation order or a summons served by the OSC to a company or an employee at a company to: (a) a prudential financial regulatory authority such as the Office of the Superintendent of Financial Institutions and equivalent regulators, (b) an expanded list of counsel where it would facilitate responses to investigation requests and summonses, (c) any person where the disclosure is necessary to comply with requests from OSC Staff or for sound corporate governance, such as the company’s internal compliance and governance officers, or (d) the company’s board of directors and senior management.

42. Ensure proportionality for responses to OSC investigations

Given the potential burden imposed by OSC investigations, some stakeholders have indicated that there is a need to ensure that questions and requests for documents are subject to a reasonable or proportional threshold.


The Taskforce has heard from stakeholders that it is important that some limits apply to the response to the OSC’s investigations and examinations. The Taskforce proposes statutory amendments or other mechanisms to ensure that there is a reasonable or proportional threshold applicable to responses provided in investigations and examinations. One possibility is a statutory amendment providing that there is a “reasonable and proportionate” threshold to examination and inspection of documents or other things in investigations and examinations.

What is the best way to introduce proportionality for responses to OSC investigations? What would be the concerns with proceeding with a statutory amendment and what other mechanisms could be considered? The Taskforce understands that OSC Staff are currently developing data delivery standards. What features would provide fairness in data requests?

43. Clarify that requiring production of privileged documentation is not allowed

Under common law, respondents always have the right to not produce documents that are privileged, and the Supreme Court of Canada has made this a quasi-constitutional right. In practice, the OSC does not collect privileged information. Nonetheless, some stakeholders have noted that further clarification is necessary, such that privileged documents must not be required to be produced in any circumstance during OSC investigations or examinations.


The Taskforce proposes to add language the Securities Act to specify that privileged documents must not be required to be produced during OSC investigations or examinations. On occasions where there is a challenge to the assertion of privilege, the Taskforce proposes that OSC procedures be modified to require immediate production of a privilege log. This could include the date, author, recipient and nature of thee document, the subjects it covers, and the specific basis for claiming privilege.

Please provide feedback on any challenges or concerns you may have.

44. Implement OSC procedural change to provide an invitation to discuss OSC Staff’s proposed statement of allegations at least 3 weeks before initiating proceedings

The Taskforce understands that the OSC has a longstanding process of providing notice to respondents that OSC Staff recommend initiating administrative proceedings. Currently the notice provision is two weeks. This notice ensures that, after an investigation, the OSC reach out to the respondent to discuss any infractions uncovered before initiating administrative enforcement proceedings. Stakeholders have raised the need to have discussions with OSC Staff about their concerns and a potential resolution prior to this notice.


The Taskforce proposes a procedural change whereby the OSC will invite respondents to discuss alleged infractions and a potential resolution with OSC staff at least three weeks before it delivers a notice that OSC staff will be initiating administrative enforcement proceedings.

What are the concerns with this proposal?

45. Promote prompt resolution of OSC enforcement matters by ensuring the confidentiality of dialogue between OSC Staff and parties under investigation, and protecting such investigated parties from liability for admissions made to the OSC in settlements and from liability for disclosing privacy-protected information to the OSC in the context of an investigation

The Taskforce has heard that certain parties under investigation by the OSC want to move towards a prompt resolution but may be practically impeded because of the existence of civil liability, including in class actions. Apart from no-contest settlements, OSC-approved settlement orders require admissions to be made. These admissions may be relied upon in subsequent civil proceedings, and it is possible that the substance of settlement discussions may be producible in civil lawsuits. Many parties view these risks and duties to stakeholders to more than offset incentives to resolve OSC proceedings promptly through cooperation. This may force investigated parties to conclude that they must await the resolution of related civil actions before meaningful engagement towards a resolution can occur. Further, privacy protection requirements may cause parties to be reluctant to voluntarily provide OSC Staff with certain information which may be required to drive towards a resolution without adequate protection from third party liability for doing so in good faith.


Reaching a resolution on enforcement matters is often in the best interests of both OSC Staff and significant market participants which have ongoing and continuous dealings with the OSC and need to demonstrate that they are generally compliant and abide by securities law, but may have been involved with isolated activities that are under scrutiny.

The Taskforce proposes the development of statutory provisions that ensure the confidentiality of dialogue between OSC Staff and parties under investigation, and protect investigated parties from liability for admissions made to the OSC in settlements and from liability for disclosing privacy-protected information to the OSC in the context of an investigation. Such protection from liability would prevent the use of admissions in class actions and other civil actions against the person who made the admissions. It would also restrict possible recourses for persons who are affected by the communication of their privacy-protected information to the OSC in the context of an investigation.

What are the potential concerns with such provisions? What limits or exceptions should be considered when developing these statutory provisions? What are the implications for investors of restricting the use of admissions? Do civil lawsuits, including class actions, complement regulatory proceedings to achieve investor redress and deterrence? Please comment on pertinent freedom of information and privacy implications that should be considered.

Enhancing investor protection

46. Require that amounts collected by the OSC pursuant to disgorgement orders be deposited into court for distribution to harmed investors in cases where direct financial harm to investors is provable

A statutory process to support the distribution of disgorged funds to harmed investors is important for investor protection in Ontario and is vital to the trust and confidence people have in the capital markets and in the OSC’s enforcement capabilities. It is important that ill-gotten gains recovered through the OSC’s collection efforts be distributed to the investors who were harmed, as investors may not be able to independently recover from the respondent. Recently, although it is not required to do so under the Securities Act, the OSC has used a Superior Court appointed receiver to distribute funds disgorged to the OSC in two test cases.


The Taskforce proposes requiring disgorgement order amounts collected by the OSC to be distributed to harmed investors through a court-supervised process in cases where there is sufficient evidence to establish that investors suffered direct financial harm. The process would be run by a Superior Court appointed receiver where significant funds are available for distribution. In circumstances where there are a small number of investors or funds, the Superior Court could appoint an OSC employee as administrator.

The proposed model would apply to disgorgement amounts that are collected by the OSC only. It would not contemplate distribution of administrative penalties or voluntary payments to investors, which would continue to be allocated to third parties or used for other purposes authorized under the Securities Act.

What are the commenter’s views about what the process should look like? For example, how can the process balance efficiency with fairness to individual claimants? What process should be used to resolve disputed claims? What criteria should the OSC use to determine when a receiver would be appointed or what amounts are too small to distribute to investors? How should the OSC communicate information relating to potential distributions?

47. Give the power to designated dispute resolution services organizations, such as the Ombudsman for Banking Services and Investments (OBSI), to issue binding decisions ordering a registered firm to pay compensation to harmed investors, and increase the limit on OBSI’s compensation recommendations

In light of the ongoing COVID-19 pandemic, it is becoming even more necessary to implement a regulatory framework that protects everyday retail investors by enhancing the powers of dispute resolution services in Ontario, such as OBSI, by making their recommendations binding. Currently, after OBSI has investigated a complaint from a harmed investor, it conducts necessary analysis consistent with OBSI’s loss calculation policies and, where warranted, makes a recommendation for compensation. However, registered firms that have harmed retail investors sometimes refuse to follow OBSI’s recommendations or offer settlements that fall below OBSI’s recommendations. In these circumstances, the harmed investors’ only alternative is to resort to the courts, which may not be possible given the legal costs involved and the time it takes to pursue a civil action. There are several comparable jurisdictions that already provide a framework for investor redress through a binding ombudsman scheme, notably those in the U.K. and Australia.

The OBSI $350,000 limit on compensation recommendations has not been increased in many years and is not adjusted for inflation.


The Taskforce proposes creating a regulatory framework that allows for the designation by the OSC of a dispute resolution service, such as OBSI, and makes the dispute resolution service’s decisions binding on a registered firm, if the harmed investor accepts the recommendation. The OSC would implement and oversee a comprehensive oversight regime for designated dispute resolution services and ensure necessary changes are made to the designated dispute resolution services’ processes to provide procedural fairness for registered firms and investors.

The proposal would also require the development by the designated dispute resolution service of an independent internal appeals process. There would be no appeal to the OSC. Parties to a potential judicial review proceeding of an OBSI decision would be the registered firm and OBSI.

Such a framework to provide redress to harmed investors, in particular retail investors that have been harmed and lost an amount too low to consider a court action, would increase investor confidence in the capital markets by assuring that investors are compensated, when warranted, for financial losses that relate to the trading or advising activity of a registered firm.

Would commenters think that the proposal to give a designated dispute resolution services organization the power to issue binding decisions is appropriate? Are there other proposals that the Taskforce could consider to ensure retail investors who have been harmed and lost an amount too low to consider a court action are compensated?

Do commenters consider OBSI to be suitably equipped to make binding decisions on complex capital markets matters, specifically on exempt market issues? What structural or governance requirements should the OSC impose on OBSI as part of the designation process?

What should the maximum binding compensation amount per misconduct potentially imposed on a registered firm be considering that the objective is to provide compensation to retail investors who lost smaller amounts? Would there need to be a mechanism in place to avoid the risk that registered firms may be penalized more than once for the same misconduct if they are required to make a binding payment and are also subject to enforcement proceedings by the OSC or SROs?

The Taskforce also proposes a one-time increase of the limit on OBSI’s compensation recommendations to $500,000 with subsequent increases every two years based on a cost of living adjustment calculation. For greater certainty, this proposal is separate from the proposal to provide the binding decision-making power to dispute resolution services organizations. Would commenters support such an increase to the limit on compensation recommendations?