Critics are questioning the program's effectiveness as a punishment and deterrent
Over the past few years, the Ontario Securities Commission (OSC) has settled cases with numerous financial institutions under its no-contest settlement program. These have been touted as regulatory victories, but various critics are questioning the scheme’s overall effectiveness.
Scotiabank, RBC, TD, and other institutions have admitted to charging excess fees over periods ranging from six to 14 years, according to CBC News. Collectively, the institutions collected $354 million in excess fees.
The firms disclosed these transgressions to the OSC under its no-contest settlement program. Introduced in 2014, no-contest settlement agreements allow certain enforcement matters to be resolved without a respondent having to make admissions of fact or liability. The respondent also has to agree to sanctions, which have so far included paying fines and compensating clients.
While the OSC considers the program a win, critics are questioning its effectiveness as a long-term solution.
“These no-contest settlements are absolving the industry of the responsibilities for the last 10 years,” Stan Buell, president of the Small Investor Protection Association (SIPA), told CBC News. “[H]ow can regulators claim that they protect investors when these companies have been doing this for 10 years undetected?”
“I think it provides an easy out for people who have been involved in misconduct,” said Michael Watson, a former director of enforcement with the OSC and current special adviser to the RCMP's integrated market enforcement program. He said that respondents in no-contest settlements might not be as reluctant to commit future transgressions.
Lawyer Anita Anand, who holds the J.R. Kimber Chair in investor protection and corporate governance with the faculty of law at the University of Toronto, had similar concerns. She said the program might not be that effective in terms of “sending a message” that would discourage others.
Anand added that the settlements’ closed-door process, which limits information concerning a case that comes forward, casts doubt on how they are reached. While the OSC releases the agreements, not all documents relating to them are publicized.
However, both Watson and Anand acknowledged some good points. The program can help prevent cases from dragging on for years, and the victims get restitution. Watson also noted that cases resolved under the scheme “probably wouldn’t have otherwise” gone public.
Speaking to CBC News, OSC Director of Enforcement Jeff Kehoe said that such agreements are used in limited circumstances. The settlements also provide a way of “getting the case done in a timely way, getting investor harm remediated and fixing the problems.”
“A fine is a stigma and a deterrence no matter how you label it," he said.
For more of Wealth Professional's latest industry news, click here.
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Scotiabank, RBC, TD, and other institutions have admitted to charging excess fees over periods ranging from six to 14 years, according to CBC News. Collectively, the institutions collected $354 million in excess fees.
The firms disclosed these transgressions to the OSC under its no-contest settlement program. Introduced in 2014, no-contest settlement agreements allow certain enforcement matters to be resolved without a respondent having to make admissions of fact or liability. The respondent also has to agree to sanctions, which have so far included paying fines and compensating clients.
While the OSC considers the program a win, critics are questioning its effectiveness as a long-term solution.
“These no-contest settlements are absolving the industry of the responsibilities for the last 10 years,” Stan Buell, president of the Small Investor Protection Association (SIPA), told CBC News. “[H]ow can regulators claim that they protect investors when these companies have been doing this for 10 years undetected?”
“I think it provides an easy out for people who have been involved in misconduct,” said Michael Watson, a former director of enforcement with the OSC and current special adviser to the RCMP's integrated market enforcement program. He said that respondents in no-contest settlements might not be as reluctant to commit future transgressions.
Lawyer Anita Anand, who holds the J.R. Kimber Chair in investor protection and corporate governance with the faculty of law at the University of Toronto, had similar concerns. She said the program might not be that effective in terms of “sending a message” that would discourage others.
Anand added that the settlements’ closed-door process, which limits information concerning a case that comes forward, casts doubt on how they are reached. While the OSC releases the agreements, not all documents relating to them are publicized.
However, both Watson and Anand acknowledged some good points. The program can help prevent cases from dragging on for years, and the victims get restitution. Watson also noted that cases resolved under the scheme “probably wouldn’t have otherwise” gone public.
Speaking to CBC News, OSC Director of Enforcement Jeff Kehoe said that such agreements are used in limited circumstances. The settlements also provide a way of “getting the case done in a timely way, getting investor harm remediated and fixing the problems.”
“A fine is a stigma and a deterrence no matter how you label it," he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Wells Fargo punished over volatility ETPs
CIBC divisions admit to overcharging
