The trial that began with criminal charges over the Bre-X fraud took six years and ended with the Ontario Securities Commission losing completely. The cost of the investigation and trial soared into seven figures. Charges involving another company, Atlas Cold Storage, resulted in the OSC’s abandoning its prosecution in mid-trial. More recently, the regulator’s nearly seven year stock tipping and insider trading case against Andrew Rankin, the former managing director of RBC Dominion Securities, after unraveling on appeal, yesterday came down to his paying $250,000 to settle the matter. No conviction will be recorded. The costs of that investigation and trial also mount into the millions. The OSC’s charges involving executives at Livent and Hollinger are still to be heard. They would probably move ahead faster if they were sitting on a glacier.
The regulator’s decision gives rise to troubling questions as to whether this is the proper outcome in light of the facts of the case and the high costs incurred by the OSC, and whether it will serve as an adequate deterrent to stock tipping and insider trading in the future. In addition, there are concerns being expressed widely within and outside Canada about the OSC’s judgment and overall competence in the enforcement field, given this and other events in the recent past.
As we have observed before on these pages and in this post more recently, the OSC’s problems fundamentally come down to an issue of governance: too many people are engaged in playing too many roles as policy makers, investigators and adjudicators with a level of oversight that lacks both transparency and efficacy.
You have to ask yourself how much more evidence and how many more embarrassments do Ontario’s lawmakers need before they get the message that the OSC is operating as a dysfunctional and underperforming institution? If they spent any time talking to investors, and especially those outside Ontario, they would have no doubt.
When the reputation of a major securities regulator begins to resemble the reality show The Biggest Loser, you know you have a problem that needs fixing.