TORONTO, July 11,
2024 /CNW/ - The Ontario Securities Commission
(OSC) today published for comment a rule proposal that would
establish a new process for returning money to harmed
investors.
The proposed process would apply when disgorgement is ordered in
an enforcement proceeding before the Capital Markets Tribunal or
the Ontario Superior Court of Justice, and the OSC receives
sufficient funds to make a distribution feasible.
The OSC is publishing the rule proposal to address recent
legislative amendments to the Ontario Securities Act, the
Commodity Futures Act, and the Securities Commission Act,
2021. Upon proclamation, the legislative amendments will create
a statutory framework for the distribution of money received by the
OSC under disgorgement orders.
The rule proposal outlines:
- the circumstances in which money received under disgorgement
orders is required to be distributed;
- the eligibility requirements for investors seeking a
payment;
- the process for distributing disgorged amounts in cases where a
court-appointed administrator is not used; and
- the use of other monetary sanctions and settlement payments to
pay certain administrative costs in relation to the distribution of
disgorged amounts.
Disgorgement is a type of monetary sanction imposed by the
Capital Markets Tribunal or the Ontario Superior Court of Justice.
Disgorgement sanctions require the respondent in a proceeding to
pay any amounts they have obtained as a result of their
non-compliance with securities law or commodity futures law. There
is currently no prescribed process for making distributions to
harmed investors from funds disgorged to the OSC.
While disgorgement orders are not imposed to compensate
investors, the legislative amendments contemplate that, in
circumstances established under the proposed rule, amounts received
under these orders could be distributed to investors who incurred
direct financial losses as a result of the conduct giving rise to
the order.
Under the proposed rule, the OSC would be required to publish a
report on each completed distribution to promote transparency and
awareness about the distribution process.
The OSC will also develop plain-language resources to help
investors understand the new statutory distribution framework and
the payment application process.
Proposed OSC Rule 11-502 Distribution of Amounts Paid to the
OSC under Disgorgement Orders, Proposed OSC Rule 11-503
(Commodity Futures Act) Distribution of Amounts Paid to the OSC
under Disgorgement Orders and their companion policies are
available on the OSC's website.
Please submit comments in writing on or before October 9, 2024.
The mandate of the OSC is to provide protection to investors
from unfair, improper or fraudulent practices, to foster fair,
efficient and competitive capital markets and confidence in the
capital markets, to foster capital formation, and to contribute to
the stability of the financial system and the reduction of systemic
risk. Investors are urged to check the registration of any persons
or companies offering an investment opportunity and to review the
OSC investor materials available at https://www.osc.ca.
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SOURCE Ontario Securities Commission