On March 11, 2014, the Ontario Securities Commission (the
"OSC") adopted the following enforcement initiatives
aimed at encouraging cooperation from market participants and
streamlining its dispute resolution process:
A new program to facilitate the settlement of appropriate
enforcement cases in circumstances where the respondent does not
make formal admissions respecting its misconduct (sometimes
referred to as no-contest settlements);
A new program for explicit no-enforcement action
A clarified process for self-reporting under Staff's credit
for cooperation program; and
Enhanced public disclosure by Staff of credit granted to
persons for their cooperation during enforcement
Perhaps most noteworthy among these four new initiatives, which
are set out in OSC Staff Notice 15-702, is that the OSC is now
willing to resolve certain enforcement matters on the basis of a
settlement agreement in which the respondent does not make formal
admissions regarding its alleged misconduct or contravention of
Ontario securities law.2
Historically, the OSC, and other regulatory organizations,
refused to enter into settlement agreements without an
acknowledgment of wrongdoing. This approach often stymied
settlement discussions as formal admissions could (and likely
would) be admissible in any related civil proceeding.
This new policy to accept no-contest settlements fosters the
efficient resolution of regulatory disputes and is ultimately a
positive development. It enables market participants to enter into
settlement agreements, in proper circumstances, without the risk of
admissions against interest (a constant feature of all settlement
agreements in the old regime) being used against them in subsequent
However, the OSC indicated that no-contest settlement agreements
would not be appropriate in serious cases where:
the person has engaged in abusive, fraudulent or criminal
the person's misconduct has resulted in investor harm which
has not been addressed in a satisfactory manner; and
the person has misled or obstructed Staff during its
In the United States, the Securities and Exchange Commission has
entered into no-contest settlements for many years. Yet, this
approach has been controversial. In U.S. Securities and Exchange
Commission v. Citigroup Global Markets Inc., for example, Judge
Rakoff refused to approve a $285 million no-contest settlement
agreement as it was "neither reasonable, nor fair, nor
adequate, nor in the public interest."4
One hopes that the OSC's adoption of no-contest settlement
agreements reflects a trend among regulatory bodies. It remains to
be seen whether other provincial securities regulators and/or the
Investment Industry Regulatory Organization of Canada—the
national, self-regulatory organization charged with the oversight
of investment advisors and trading activity on Canada's debt
and equity marketplaces—will follow suit.
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