Oversight or interference? Jensen's pending departure sparks debate about government's relationship to OSC

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Maureen Jensen’s decision to leave the Ontario Securities Commission nearly a year before her term as chairperson expires is reviving debate over the relationship between Canada’s largest capital markets watchdog and the government that oversees it.

Traditionally, the OSC, which governs everything from initial public offerings to fraud charges, has operated at arm’s length — something advocates of such an arrangement say ensures the capital markets function with consistency and without being subjected to partisan whims.

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But Jensen’s pending departure comes as Ontario Premier Doug Ford’s Progressive Conservative government has taken a more active stance on regulation in general and the OSC specifically.

Not only did it prompt the launch of a “burden reduction” task force at the regulator, but in a rare public disagreement on policy, the government came out against the OSC’s proposal to ban commissions on certain mutual funds last year, leaving Ontario as the only jurisdiction that did not adopt it.

While Ford’s “open for business” policy has been cheered by the investment community, others view the approach to the OSC as a significant change that muddies the waters on oversight.

“I mean, who’s running the show? Is it the government or is it the body that they set up to deal with this stuff?” said Alan Lenczner, a recently retired civil litigator who served as an OSC commissioner between 2013 and 2017, and once represented Doug Ford’s brother Rob, the former Toronto mayor, in a civil case.

Ed Waitzer, who was chair of the OSC in the mid-1990s and is now a partner at Toronto-based law firm Stikeman Elliott LLP, also expressed concerns about the signals sent by the government’s public disagreement with the OSC.

“I worry about that sort of political interference.… It just sets up all the wrong kinds of incentives,” Waitzer said. “Why bother engaging with the CSA (a national umbrella group for provincial securities regulators) if you can go straight to Queen’s Park and get something shut down?”

I mean, who’s running the show?

Others however, note the province has long had the power to reject OSC rules or send them back for reconsideration, and that the Ford government’s stance on regulation has been embraced by the investment industry.

A “burden reduction” task force at the OSC, for example, rolled out more than 100 red tape-cutting reforms in November, including simplified registration and the elimination of duplicative and arbitrary filings.

“This is very positive to the industry, particularly to the smaller firms,” said Ian Russell, chief executive of the Investment Industry Association of Canada.

Ford and his government pledged to lighten the regulatory burden across the board as they were swept to power in June of 2018. They established a public target for regulatory burden reduction of 25 per cent, and introduced red-tape-cutting measures in a number of industries including automotive, dairy and agriculture.

The rationale is that the costly and time-consuming and costly regulatory burdens hold back economic growth.

Peter Van Loan, a former federal cabinet minister under Stephen Harper and partner at law firm Aird & Berlis LLP, said positive effects of deregulation are already being seen.

We are committed to increasing confidence in our capital markets

“Seventy-six per cent of (Canadian job growth in 2019) happened in Ontario, which is about 40 per cent of the country, so that tells you that Ontario is progressing far better than the rest of the country, and I think the regulatory agenda had a lot to do with that,” he said.

In many sectors, including those dealing with securities, there’s been “a layering of regulation upon regulation; that was the answer to every issue,” Van Loan said. “So there’s a bit more tilt towards helping the economy.”

Waitzer said he is a strong believer in oversight — and supports the government’s plan unveiled in November to carry out a long-overdue review of the Securities Act — but he said the government’s recent behaviour, including “clearly partisan appointments (of commissioners)” is trampling on on the design and intent of securities regulation, which has an established track record of success.

“The commission’s purpose and its institutional design was to permit expert and responsive policy development and administration … relatively free from the immediate pressures of partisan politics and bureaucratic constraints,” he said. “Over time, it’s worked reasonably well.”

When asked about the government’s relationship to the OSC, Emily Hogeveen, press secretary to Minister of Finance Rod Phillips, said the regulator had been a “critical partner” in executing the government’s capital markets plan.

“Our Government is continually working with the Ontario Securities Commission to modernize regulatory requirements to foster more competitive capital markets,” Hogeveen said. “We are committed to increasing confidence in our capital markets, so Ontario is a globally competitive place to invest.”

Last week, Hogeveen said there was no rush to find a new OSC chair to replace Jensen, as OSC vice-chair Grant Vingoe has agreed to be acting chair for up to a year after she departs in April.

A search firm will be used and the selected candidate will be referred to Cabinet. The selection will then be reviewed by the all-party Standing Committee on Government Agencies, Hogeveen said.

Financial Post

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