This is an unprecedented time for the capital markets in Ontario, across Canada and around the world. The markets have experienced extreme volatility, undermining the confidence in markets of many investors and market participants. In this environment, the role of a securities regulator is particularly important in fostering confidence in the integrity of the capital markets.
Responding to the turmoil in the markets
Throughout the market turmoil in 2008–09, the OSC has responded with initiatives meant to provide protection to investors and foster confidence in fair and efficient markets. This Annual Report highlights the key elements of this response.
We have worked closely with the Ontario Ministry of Finance, federal Department of Finance, Bank of Canada, Office of the Superintendent of Financial Institutions, other members of the Canadian Securities Administrators (CSA), self-regulatory organizations (SROs) and the Ombudsman for Banking Services and Investments (OBSI). We have coordinated our activities, where appropriate, and have regularly communicated with each other on important issues arising from developments in the marketplace. Increasingly, our discussions have included issues related to risks to the financial system and we expect these issues to attract more attention from governments and financial market regulators in the coming year.
We have contributed to important national securities regulatory initiatives. For example, the OSC played a lead role in the preparation of a consultation paper on non-bank sponsored asset-backed commercial paper (ABCP). The consultation paper, released by the CSA in October 2008, outlines regulatory proposals including a recommendation to regulate credit rating agencies in Canada. We are planning to bring forward specific recommendations based on this consultation paper in the coming year.
We have also been active internationally. We are working closely with our fellow regulators in the International Organization of Securities Commissions (IOSCO) as well as with the U.S. Securities and Exchange Commission (SEC).
In Ontario, our response has included:
- Close monitoring of disclosures by public companies, especially those in the financial services sector as well as highly leveraged companies;
- Compliance reviews of money market investment funds and non-conventional investment funds based in Ontario to assess their asset exposures; and
- Compliance reviews of Ontario-based hedge fund managers to determine whether they posed particular risks, given prevailing market conditions.
We have reported publicly and specifically to the Legislature’s Standing Committee on Government Agencies on our response to recent unprecedented market turmoil. It is important for investors and market participants to be informed of our initiatives. The OSC recognizes that recent market volatility has created challenges for investors and market participants. As a result, fostering investor confidence is an important, albeit challenging, task. (The Strong Investor Protection section contains more details about the OSC’s work to provide protection to investors.)Regulatory reform
Recent market events have focused public scrutiny on regulatory systems, including Canada’s system of 13 securities regulators. In January 2009, the Expert Panel on Securities Regulation recommended the creation of a single securities regulator for Canada. The Government of Ontario expressed its satisfaction that the Expert Panel endorsed Ontario’s long-standing support for a single regulator. The OSC supports the Government of Ontario’s position and welcomes any step that takes Canada closer to establishing a single securities regulator to administer and enforce a single securities act and charge a single schedule of fees to market participants.Fiscal priorities
The difficult conditions in the financial markets have had a substantial impact on the real economy. Therefore, the OSC in consultation with the Ontario Government has decided to maintain its fee schedule unchanged for the 12-month period ending March 31, 2010. The resulting operating shortfall will be absorbed by our accumulated operating surplus and as a result will not affect our ability to deliver balanced and effective regulation.
In the current environment, the OSC is imposing fiscal discipline on all of our operations. We are being prudent in terms of spending but remain focused on achieving our key priorities. Resources will be allocated to their most productive uses to ensure that we continue to carry out our responsibilities effectively and efficiently during these difficult times.
In 2008–09, the OSC worked diligently to deliver balanced and responsive regulation that provides protection to investors and fosters confidence in the capital markets. Our work in this regard is ongoing. At this time, it is especially important to increase our vigilance in order to fulfill the OSC mandate and vision.
I would like to thank, on behalf of the investors and market participants in Ontario, all of the Commissioners, management and staff of the OSC for their tremendous efforts during a turbulent period in the capital markets.
Yours very truly,
Chair and Chief Executive Officer
Ontario Securities Commission