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Ontario’s Capital Markets Modernization Task force report draws criticism

Investment Executive | James Langton | Sep 21, 2020

Ontario government building 1 - Ontario's Capital Markets Modernization Task force report draws criticismSweeping recommendations to reform Ontario’s securities laws are facing a barrage of criticism from certain corners of Bay Street.

The Ontario Capital Markets Modernization Taskforce, which began its review of the province’s securities laws in February, published its draft recommendations in July. The task force aims to deliver its final recommendations to the government by the end of the year, despite conducting most of its consultations amid a global pandemic.

The task force’s work has been remarkable for both its speed and its ambition, but critics say the group’s recommendations are ill-conceived, threaten investor protection and could undermine the province’s efforts for more vibrant capital markets.

The task force’s July report proposes a series of reforms largely designed to stoke growth in the capital markets. In addition to the Ontario Securities Commission’s (OSC) traditional priorities of investor protection and ensuring fair and efficient markets, the task force proposes expanding the regulator’s mandate to include an obligation to foster capital formation and competition.

The task force also recommends overhauling Ontario’s existing regulatory structure, easing a variety of constraints on raising capital, remodelling proxy voting and corporate governance, and revisiting enforcement and investor restitution mechanisms.


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Many proposals set off alarm bells and, given the speed of the consultation process and the number of bold ideas in the report, perhaps that isn’t surprising.

First of all, revising the OSC’s marching orders to include a mandate to foster market growth is sparking concern. The submission from the OSC’s independent Investor Advisory Panel (IAP) warns that expanding the OSC’s mandate could undermine the regulator’s raison d’être, leaving the OSC “in the awkward and unenviable position of being seen as a cheerleader for Ontario’s capital markets when the OSC should more appropriately be positioned as a fair and objective regulator of those markets.”

Even if the government’s top priority is driving market growth, strong investor protection is a prerequisite for attracting capital, the Canadian Coalition for Good Governance (CCGG) cautions in its submission to the task force:

“Reforms that risk eroding investor protection or increasing regulatory burden for investors, risk losing the patient global capital that fuels capital formation over the long term.”

The CCGG, which represents institutional investors that collectively manage $4.5 trillion in assets, states in its submission that a number of the task force’s recommendations — including measures to regulate proxy advisory firms, to give issuers more information on shareholders and to involve the OSC in the handling of shareholder proposals — are “antithetical” to the OSC’s investor protection mandate.

Various submissions propose that several of the task force’s recommendations threaten to diminish investor protection.

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