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Thank you for that introduction, Mark Adler. And thanks to the Economic Club of Toronto for inviting me to speak today.

Ladies and gentlemen, I'm very pleased to be here at the Economic Club. I'd like to thank the Honorable Gerry Phillips, Minister responsible for securities regulation in Ontario, for joining us today. I'd also like to thank my regulatory colleagues that are with us - Joe Oliver, Susan Wolburgh Jenah and Larry Waite.

Ladies and gentlemen, securities regulators face many tough challenges. Today, I want to talk about three of them:

• First, the importance of regulatory vigilance to protect investors.
• Second, our commitment to continually improve enforcement in a world where fraud is becoming much more sophisticated.
• Third, how securities regulators can best contribute to achieving these objectives – to the benefit of investors, issuers, intermediaries and the overall economy.

Investor Protection

First, protecting investors.

This is really "job one" for securities regulators around the world. The continued health of the capital markets depends upon people being willing to put up risk capital for investment.

Put simply, if you haven't got investors, you haven't got a market.

Now, some warn that the system is biased against the people who put up the risk capital - the shareholders and the providers of credit. According to one of Canada's leading money managers, Stephen Jarislowsky:

“Too often the laws and the deep pockets favor the corporations rather than the investor.”

Well, in my own experience, I've learned it's too easy for investor opinion to be drowned out in a chorus of well-financed voices.

There's tremendous competition for the regulator's ear. I've become increasingly aware of the difficulties in trying to prevent the concerns of investors from being swamped.

Just look at the other participants in the process. Public companies are well-organized. Large public companies have virtually unlimited resources to get their point-of-view across to regulators and to governments.

They speak with a collective voice and are assisted by well-funded lobby groups.

The investment industry is also well-organized. It speaks with a powerful voice through a number of trade associations. Like the public companies, it's vital that we hear from them.

Corporate lawyers and accountants all earn their keep from corporate clients. They represent a more subtle, but omnipresent, advocacy group for these corporations.

They have a way of getting attention - that's their job.

But who speaks for the investor? How well represented are those who provide the risk capital compared to those who manage it or broker it?

Public companies and The Street are concentrated - investors, by their nature, are much more dispersed.

They don't have a common voice.

For institutional investors, the Canadian Coalition for Good Governance (CCGG) was founded three years ago. The CCGG has made an outstanding contribution to the public discussion of important issues from an investor's perspective.

For retail investors, a number of small groups are working hard to represent the interests of individual shareholders. It's a tough job.

How many Canadian investors have the time or opportunity to articulate their views to regulators? Most are focused on simply learning how to manage their investments more effectively.

In this environment, regulators must be constantly vigilant on behalf of the investor. The investor has to know that someone is working to keep the playing field level.

Ladies and gentlemen, that "someone" has to be the regulator.

Here are a few areas where the OSC has been working on behalf of investors:

• Enhanced corporate disclosure;
• Better oversight of investment fund managers;
• Improved disclosure of how much investors are paying the managers;
• Rules around best-execution on the stock exchanges; and
• Regular consultations with the OSC's Investor Advisory Committee.

Investor protection is embedded in our mandate.

We have to balance this with fostering fair and efficient capital markets. That's also in the best interests of investors - as well as market participants and the overall economy.

One of the initiatives we're working on in the next year is improving the disclosure provided by mutual fund managers. Ours is a disclosure-based regime. The regulators' commitment to investors is: You are entitled to all the relevant facts.

But achieving full and appropriate disclosure is seriously - perhaps fatally - compromised if the disclosure is so cumbersome and so complex that investors don't read it or, if they do read it, they don't understand it.

Let's be honest. We regulators have permitted excessively lengthy and complex disclosure to become the order of the day.

Here's an example of how legislators, regulators, lawyers and accountants let the disclosure-based regime get out of control.

In the mid-1990s, mutual fund prospectuses were judged to be too long and complex.

Investors simply didn't read them.

So the regulators mandated the "simplified prospectus" regime for mutual funds. Today, a "simplified" mutual fund prospectus can run to 80 pages or more.

So, what are we doing about this?

We're using more plain language to help investors.

The OSC is working with Canada's securities and insurance regulators to develop a two-page point-of-sale disclosure document for mutual funds and segregated funds.

This prototype document will contain all the key information about the product, the sales charges and the fees that the investor is paying. This kind of plain-language disclosure will make the investment options easier to understand.

I've mentioned just some of the OSC's investor-protection initiatives.

I can assure you that we will think about investor protection in everything that we do.


Compliance and Enforcement

My second related topic today is compliance and enforcement.

We must instill and maintain confidence that our securities laws will be complied with - and when they're not complied with, they will be enforced effectively.

One important way to protect investors is through rigorous compliance oversight activity.

I believe that people behave differently when they know that someone is checking on their conduct. Most drivers watch their speed if they think a radar trap might be nearby.

And it's our job to provide market participants with a degree of clarity about how to achieve compliance with our rules.

About a month ago, John Tiner, CEO of the U.K.'s Financial Services Authority (FSA), told us that the FSA spends about 10 percent of its annual budget on enforcement activities. This is about half the proportion that the OSC spends on enforcement.

The FSA invests a larger share of its resources on the intensive compliance oversight of regulated entities - both issuers and intermediaries.

This is a significant shift in emphasis for a securities regulator.

John Tiner didn't even call it compliance oversight. He referred to it as "consultations" with the regulated parties - such classic British understatement.

Well, I used to work for an FSA-regulated entity. Let me tell you - they were the most pointed and persistent "consultations" you'll ever see.

The compliance bar is high. And it should be.

This is a key cost of doing business for market intermediaries.

But it's worth it.

Effective compliance is an essential part of making sure that our markets can attract competitively-priced risk capital.

Let's be clear about something: The overwhelming majority of issuers and market participants are honest practitioners. They work hard to comply with the rules. They know that it's in their best interests for the markets to have integrity.

But a small minority of firms and individuals prey on investors. Unfortunately, this small group has a disproportionate impact on the perception of Canada's capital markets.

I understand the challenge of trying to close a gap between perception and reality.

When I took this job, the main issues that people talked to me about were related to enforcement.

Let me assure you - active enforcement is a top priority for the OSC.

Some say the Commission is too tough, while others say we're not tough enough. We're a public agency and we can take criticism. And we should take criticism, when merited.

We're not perfect.

We have many enforcement tools available to protect investors - and we use them.

In every case, we assess the evidence, the seriousness of the conduct, and the best means to protect investors and to protect our markets.

For the majority of our enforcement cases, we go before our Commission.

The Commission has powerful tools to protect investors, including cease-trade orders, director and officer bans and disgorgement of ill-gotten gains.

In some cases, we go to the courts and seek jail sentences to send a strong message of deterrence and to punish wrong-doers.

When it comes to obtaining convictions against white-collar criminals, the bar is high - and it should be. Sometimes, evidence of securities fraud is very difficult to obtain.

There's no DNA evidence.

No fingerprints.

No eyewitnesses.

Mostly what we have to work with is lots and lots of documentary and circumstantial evidence.

It takes a lot of resources and time to "follow the paper trail." That's the way it is and it's a good reason to re-double our efforts in the enforcement field.

But it's important to understand the challenges.

We conduct in-depth investigations of every instance of unusual trading. We search for an inside connection - we seek out every possible source of information.

But what if our investigators and law-enforcement agencies can't establish an inside connection for the unusual trading activity?

Then it's a real challenge to counter the defense that the suspect is simply a "very shrewd investor."

And, with globalization comes the proliferation of even more sophisticated cross-border frauds. Fraudsters are always coming up with new schemes to exploit the accessibility and transparency of our very open financial system.

Regulators and police have responded by coming up with new ways to fight new kinds of economic crime - but our work here is not finished by any means.

One of the ways the OSC is responding is by setting up a new unit to fight scams and illegal distributions, including boiler rooms.

Scam artists have taken the old cons and juiced them up using new technology. For example, we have always had pump-and-dump schemes. Now they're being spread by spam e-mail promotions. Fraudsters also use "regulatory arbitrage" across borders to frustrate prosecution by local authorities.

Our new anti-scam unit will deploy staff with market, regulatory and law-enforcement expertise to collaborate with other law-enforcement agencies. By aggressively targeting these scams and shutting them down, we can protect investors.

Fighting economic wrongdoing is, increasingly, a collective effort - no one agency can do it all or do it alone.

Fortunately, there's momentum for making enforcement the priority that it should be. Just look at the last federal budget, and the government's commitment to fight misconduct in the capital markets.

The Integrated Market Enforcement Teams - IMETs - will see their annual budget jump by one-third - from $30 million to $40 million. I look forward to the appointment of a senior expert advisor to the RCMP to help them improve the overall effectiveness of the IMETs.

As well, I'm honored to be the co-Chair of a new working group to improve enforcement of laws against securities fraud in Canada.

This working group is made up of regulators, prosecutors and police at the federal, provincial and local levels. It was formed last January at the specific request of the federal and provincial justice ministers. Recommendations for the ministers will be tabled at the end of the year.

And also look for continued cooperation with our American counterparts. The OSC is strengthening its relationship with the SEC. For example, the SEC recently cited the assistance of the OSC and other Canadian authorities in a spam e-mail investigation that led to the suspension of 35 companies from trading.

We also work with the FBI and the U.S. Department of Justice to disrupt illegal activity at the earliest possible stages.

These enforcement relationships have been highly productive.


Our Common Objective

As I mentioned, the third area I'd like to briefly comment on is regulatory structure.

I'm constantly asked: "Will Canada ever have a modern securities regulatory structure to optimize the achievement of the two core goals of all securities regulators - investor protection and fostering of fair and efficient markets?"

My answer has always been - it's up to the politicians to reach agreement to modernize our system.

In the meantime, we regulators need to do the best job we can with the structure that we've inherited.

Everyone here knows that provincial governments other than Ontario support the proposed Passport system of securities regulation.

The OSC views the Passport initiative as a constructive step in the journey toward meaningful regulatory reform, but it should not be the final destination.

Minister Phillips, the OSC urges you to continue to work with your ministerial colleagues to chart a path toward the urgently needed modernization of our securities regulatory structure.

Investors, market participants and the overall economy will all benefit if you are successful.


Conclusion

Ladies and gentlemen, I've touched on three areas today.

One, investors count on regulators to protect their interests. And the markets count on investors to provide risk capital.

Two, effective compliance and enforcement are at the top of the OSC agenda.

Three, we must continue to evolve and modernize our regulatory structure.

Let me just underscore how important each of them is to our capital markets.

All of us have a stake in advancing the integrity of our capital markets.

And all of us have a role to play in contributing to market integrity.

Thank you very much.

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