OSC to publish reports and provide resources to help investors navigate the new distribution process
The Ontario Securities Commission (OSC) has published a rule proposal today to establish a new process for returning money to harmed investors.
This process will apply when the Capital Markets Tribunal or the Ontario Superior Court of Justice orders disgorgement, and the OSC receives sufficient funds for distribution.
This proposal addresses recent amendments to the Ontario Securities Act, the Commodity Futures Act, and the Securities Commission Act, 2021. Once proclaimed, these amendments will create a statutory framework for distributing money received by the OSC under disgorgement orders.
The proposed rule specifies the following:
- When money received under disgorgement orders must be distributed.
- Eligibility requirements for investors seeking payment.
- The distribution process when no court-appointed administrator is used.
- Use of other monetary sanctions and settlement payments to cover administrative costs related to distributing disgorged amounts.
Disgorgement, imposed by the Capital Markets Tribunal or the Ontario Superior Court of Justice, requires respondents to pay any amounts obtained through non-compliance with securities or commodity futures law.
Currently, no prescribed process exists for distributing these funds to harmed investors.
Although disgorgement orders do not aim to compensate investors, the legislative amendments allow for distributing funds to investors who suffered direct financial losses due to the conduct leading to the order.
Under the proposed rule, the OSC must publish a report on each completed distribution to promote transparency and awareness. Additionally, the OSC will develop plain-language resources to help investors understand the new statutory distribution framework and the payment application process.
