Money Managers

Discord at the OSC says Globe

OSC's new chair Heather Zordel and the Ford government are pushing for reform.
OPM 3 min read

The Globe is reporting this morning that the Ontario Securities Commission is not one big happy family, following the appointment of Heather Zordel as Chair of the board of directors earlier this year. Heather is a long-time Tory donor and a Bay Street lawyer, whose practice skewed towards smaller issuers, in the resource and technology space. Heather's appointment is viewed as part of the Ford government's efforts to "put an anti-regulatory stamp on the OSC." The Ford government apparently wants to move to a more "buyer beware" approach. From everything I have read about Heather, she is a breath of fresh air and all sensible market participants should be thrilled with her appointment. David S. Brown, partner at WeirFoulds said Heather would view securities regulation through the "lens of entrepreneurialism, risk-taking, capital formation and job creation..."

While the Globe article was informative, fair and balanced, I have little doubt it was spurred by disgruntled apparatchiks within the OSC who are threatened by much needed reform. The OSC is overrun by large firm lawyers who unlike Heather, have made their career from assisting large banks, issuers and fund complexes. For example, OSC CEO Grant Vingoe was most recently partner at Norton Rose Fulbright, a top 20 global law firm. Heather had a previous role as a commissioner serving on the OSC panel that makes judgments in enforcement matters. Her tenure in that role was polarizing and some crybaby members have resigned, now that she has been elevated to Chair of the whole OSC.

Heather first came to my notice thanks to another Globe article that highlighted how in that previous role as part of an adjudication panel, she had provided dissenting opinions in two cases. This is apparently an unusual move by OSC tribunal standards: there has been only one other dissent written in the past decade. One of Heather's dissent suggested a higher standard for what constitutes "material non-public information" in insider trading cases. Her other dissenting opinion was about the latitude an issuer enjoys in deviating from the business plan stated in the offering memorandum. Without comment on the respondents in the cases, who might not be angels, I thought both of Heather's dissenting opinions reflected a pragmatic view of the reality of business decision-making.

David S. Brown, senior partner at WeirFoulds praised Heather's dissent work and capabilities. Veteran securities lawyer Philip Anisman expressed reservations about Heather's appointment. On the other hand, Philip Anisman wears a walrus mustache unironically, so I don't know if I'd trust his judgment.

The article raises some niggles about Heather having acted to help an issuer that was in trouble with the OSC when she was in a situation of possible conflict of interest. The Globe also makes a fuss about the high bills she charged the OSC for her dissent work (one of which ran to 88 pages).

Chair Heather has an important role in setting the overall strategic direction of the OSC and she liaises with the Finance minister. That's Peter Bethlenfalvy who himself has an interesting profile, having been Chief Investment Officer of a $5B firm and President of TD Securities in the US. He previously vetoed a rule the OSC had proposed banning certain fees on mutual funds. The government also made four commissioner appointments without seeking input from the OSC. Those who believe in less regulation have reason for hope.

I support a move to a "buyer beware" approach to securities regulation. All the rules the OSC comes up with do not result in meaningful investor protection. Most market participants find ways of screwing over investors in perfectly law-abiding ways. And ultimately, people always find outlets for their speculative urges. If securities are hyper-regulated, then people will gamble in real estate or cryptos. People have lost billions in cryptos and the OSC was largely powerless. And Bridging Finance ran a two-bit scheme right under the OSC's watchful eye and they did nothing until the losses amounted to more than a billion dollars.

The Globe article was written by Greg McArthur and Andrew Willis, it's almost 4k words, you can read it here if you must.

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