OSC Enforcement goes after ethnic minorities disproportionately

OSC targets Asians and Jews. Or vice versa. Who knows.
OPM 4 min read

I fear I am going to lose some of you with my interest in securities regulation. So I thought I’d start with a light-hearted piece on how more than 50% of people the OSC hauled into court over the past 5 years were ethnic minorities, primarily, South Asians, East Asians and Jews. Court proceedings are at the harsher end of OSC sanctions, what the OSC calls “quasi-criminal” charges. Court proceedings are initiated when “all other reasonable options have been carefully considered and executive approval has been obtained”, per an OSC manual. You can readily see from this short excerpt that there’s a preponderance of minority names:

The full list is available here if you want to check everything yourself. I went through the list going back to November 2016, ie the start of the tenure of the current Enforcement Director, Jeff Kehoe. This is an arbitrary cutoff primarily meant to get a good sample: 52 different individuals were hauled into court over that time. By my count, based on names, 29 were ethnic minorities (or a ratio of 55%). Out of the 52, 15 were South or East Asians (28%). I had to make assumptions based on names, it’s not like I could ask for DNA samples. I essentially classified people as either a minority or white. For example, a Dutch or French-Canadian sounding name would be classified as white, even though they’re minorities too.

Just the memory of stories I have read over the years made me look up this stat. I doubt that there’s anyone at the OSC staying awake at night plotting how to target more minorities. Still, it took me a while to figure possible explanations. As I am the second least racist person in the world, I am not used to thinking along the lines of ethnicity. The best explanation I came up with is that some ethnic groups might be over-represented in commercial activity. For example, Industry Canada says that 33% of startup owners were born outside of Canada. Being involved in business or trading is a pre-condition for running afoul of securities law, so that’s the relevant population. Securities fraud are a more cerebral activity than say, shoplifting or carjacking. Asians and Jews constitute 40% of Harvard. Those are the basic facts of life. I think that's a start, but not a complete explanation. Maybe the OSC has just gotten good at going after a certain type of small-scale ethnic affinity fraud and so when they see an ethnic name in a file, their eyes light up.

Now, you might wonder: could a secondary factor be that different communities have different commercial cultures - for example, in some countries, bribes are a routine aspect of business? Are you crazy? This is not the type of thing we can talk about in 2022. Let the record show that I immediately rejected your suggestion and that I believe that all people are equal, except in small, innocuous ways, like Cubans being very good at baseball. I also believe in diversity because different people bring different perspectives even though everyone is the same.

I think it’s much more noteworthy how the OSC mostly just catches small stuff, the equivalent of bike thefts. The same thing happens in tax enforcement. Most cases of criminal tax evasion involve small businesses like plumbers or restaurant owners. I can’t ever recall someone getting charged criminally for stashing money offshore. Yet I have no doubt that used to happen frequently in the past when controls were lax.

A few weeks ago, I came across the term “performative allyship”, which is part of the woke vocabulary. I eye-rolled hard when I read it - but I think it’s a useful term. The OSC’s messaging is definitely uber-woke. Many OSC execs mention their pronouns. The OSC mentions “indigenous reconciliation” in its statement of priorities. Of course, the OSC is famously going after David Sharpe of Bridging Finance, who has publicized his Mohawk background. The real question is why the OSC waited so long. I think that the OSC cares about power dynamics more than ethnicity. I believe that if you look the part, work out of big offices, use fancy lawyers, the OSC will be deferential. But if you run a rinky-dink operation, use small-time lawyers, maybe have linguistic barriers, the OSC will bully you. Bridging was allowed to go on for so long because it had the accoutrements of a real Bay Street operation. And some get away completely.

I don’t know the ethnic composition of the enforcement division. But overall, the OSC is pretty diverse. In fact, using the same counting methods as above, I estimate that more than 50% of the OSC leadership is part of an ethnic minority. The OSC has drifted far away from its core purposes and now advances social engineering agendas mandating board diversity. In light of the stats above, the OSC is well placed to understand that perfectly neutral rules implemented by well-meaning people can still result in unequal outcomes. Only 2 of the 52 charged were women. Women are either no good at fraud or very crafty at avoiding detection. Or maybe it's the patriarchy holding them back or how parents raise girls. Sociological questions are always difficult to answer. Another positive is that I can't recall ever seeing the OSC go after a Black person. On the other hand, they are nowhere to be found in OSC leadership either. I am happy to shine a light on these facts and I'll leave people who are obsessed with identity politics to figure it out.

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