Five year review committee final report reviewing the Securities Act (Ontario)

TABLE OF CONTENTS

The Committee

Letter from the Committee

Executive Summary

Introduction

PART 1 THE ROLE OF THE COMMISSION IN CAPITAL MARKETS REGULATION

CHAPTER 1 The Need for a Single Regulator

1.1

Capital Market Formation Transcends Borders

1.2

Thirteen Regulators for One Small Market

1.3

The Final Push for a National Securities Regulator


CHAPTER 2 Thinking Globally in Securities Regulation

2.1

Global Harmonization

2.2

Financial Reporting for Global Accessibility

2.3

Book-Based Settlement and the Indirect Holding System

2.4

Participation in IOSCO


CHAPTER 3 Securities Regulation - Only Part of the Capital Markets Picturen

3.1

History of Regulation of Financial Markets in Canada

3.2

The Current Regulatory Response - Functional Regulation

3.3

One Step Further - Harmonized Functional Regulation

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PART 2 FLEXIBLE REGULATION

CHAPTER 4 The Commission - Its Structure, Governance and Accountability

4.1

The Structure of the Commission

4.2

Governance Matters

4.3

Transparency

4.4

The Many Roles of the Commission


CHAPTER 5 Objectives of the Act

5.1

Purposes of the Act

5.2

Principles to Consider


CHAPTER 6 Structure of the Act

6.1

Should the Act Be Overhauled?

6.2

Enshrining Core Concepts

6.3

Housekeeping Amendments

6.4

Plain English


CHAPTER 7 Rulemaking

7.1

Background

7.2

Scope of Rulemaking Authority

7.3

The Need to Streamline the Rulemaking Process

7.4

Cost-Benefit Analyses

7.5

Blanket Rulings and Orders

7.6

Publication of Exemption Requests Granted or Denied under Rules

7.7

Review of Ontario Securities Law


CHAPTER 8 The Impact of the Internet

8.1

Overview

8.2

Application of Existing Regulation to Internet Communications

8.3

Electronic Commerce Act

8.4

Internet Offerings

8.5

Methods of Delivery

8.6

Access-Equals-Delivery

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PART 3 REGULATION OF MARKET PARTICIPANTS

CHAPTER 9 Registration

9.1

Registration

9.2

Should the Requirement to Be Registered to "Trade" in Securities Be Modified?

9.3

Does the Requirement to Be Registered to "Trade" in a Security Properly Capture the Range of Activities in Which Intermediaries Engage?

9.4

How Can the Registration System Be Made More Efficient?

9.5

Universal Registration


CHAPTER 10 Self-Regulation

10.1

Overview

10.2

Should SROs Be Required to Be Recognized?

10.3

Should Recognition Be Required for Clearing Agencies?

10.4

Should Recognition Be Required for QTRS?

10.5

Over-the-Counter Trading

10.6

Enforcing Their Own Rules

10.7

Enforcing Compliance with Securities Laws

10.8

The Separation of Self-Interest and Self-Regulation

10.9

Commission Oversight

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PART 4 REGULATING ISSUERS: DISCLOSURE, THE CLOSED SYSTEM AND CORPORATE GOVERNANCE

CHAPTER 11 Continuous Disclosure

11.1

The Importance of Continuous Disclosure

11.2

The Current Regime

11.3

Alternative Approaches to Regulation Which Emphasize the Secondary Market

11.4

How Is Continuous Disclosure Monitored and Enforced

11.5

Harmonization Issues

11.6

Civil Liability for Continuous Disclosure


CHAPTER 12 The Closed System

12.1

What Is the Closed System?

12.2

Problems with the Closed System

12.3

Recent Reforms to the Exempt Market Regime and the Resale Rules: Do They Go Far Enough?

12.4

Where Do We Go from Here?


CHAPTER 13 Disclosure Standards

13.1

Material Fact, Material Change and Material Information

13.2

What Is the Appropriate Standard for Materiality?


CHAPTER 14 Selective Disclosure

14.1

Selective Disclosure


CHAPTER 15 Financial Statement Issues

15.1

Financial Statement Disclosure

15.2

Auditor Independence

15.3

Investor Reliance on Audited Financial Statements


CHAPTER 16 Corporate Governance and Accountability of Public Companies

16.1

Certification

16.2

Audit Committees

16.3

Other Corporate Governance Requirements

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PART 5 ENHANCING FUNDAMENTAL INVESTOR RIGHTS

CHAPTER 17 Shareholder Rights

17.1

Background

17.2

Recent CBCA Amendments

17.3

The Need for Reform in Ontario

17.4

Shareholder Communications in the Context of a Take-Over Bid


CHAPTER 18 Take-Over Bid Regulation

18.1

Arrangements/Take-Over Bids

18.2

Poison Pills

18.3

Break Fees

18.4

Partial Bids

18.5

Mini-Tenders

18.5

Convertible Securities


CHAPTER 19 Mutual Fund Governance

19.1

Background

19.2

The Case for an Independent Mutual Fund Governance Requirement

19.3

Conflicts of Interest

19.4

Recruiting Qualified Mutual Fund Directors

19.5

How the Independent Governance Body Will Look

19.6

Functions of the Governance Body

19.7

Should Mutual Fund Managers Have to be Registered to Carry on Business?

19.8

Rulemaking Authority

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PART 6 ENFORCEMENT

CHAPTER 20 Overview

20.1

Introduction

20.2

Background: The 1990 Proposals

20.3

What Powers Do the Commission and the Court Currently Have?

20.4

Constitutional and Policy Considerations with Respect to Powers of the Commission


CHAPTER 21 What New Powers Should the Commission Have?

21.1

Administrative Fine

21.2

Disgorgement of Profits

21.3

Application of Money Paid as Administrative Fine or Disgorged Profits

21.4

Attribution Provision

21.5

Breach of Undertaking

21.6

Restitution or Compensation Order

21.7

Complaint-Handling and Dispute Resolution


CHAPTER 22 Which Existing Powers of the Commission Should Be Expanded?

22.1

Order Resignation as Director or Officer; Prohibit from Becoming or Acting as Director, Officer, Mutual Fund Manager or Promoter

22.2

Compliance Order

22.3

Cease Trade


CHAPTER 23 Which Existing Powers of the Court Should Be Expanded?

23.1

Maximum Fine and Term of Imprisonment under Section 122 of the Act

23.2

Proposed Authority to Order Restitution


CHAPTER 24 Other Enforcement Matters

24.1

Confidentiality under Section 16 of the Act

24.2

The Need for an Anti-Fraud and Market Manipulation Provision

24.3

Insider Trading

24.4

Insider Reporting

24.5

Freeze Orders

24.6

Costs Orders

24.7

Whistle-Blower Protection

24.8

Federal Enforcement Initiatives - One Further Step

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APPENDICES

APPENDIX A - Glossary

APPENDIX B - List of Commenters on Draft Report

APPENDIX C - Issues List

APPENDIX D - List of Commenters on Issues List

APPENDIX E - Presenters to Committee on Issues List

APPENDIX F - Ontario Securities Commission Staff Presentations to Committee on Issues List

APPENDIX G - Lessons From Australia

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