The Ontario Securities Commission has implemented a new statutory framework and related rules facilitating the distribution of funds obtained through disgorgement orders to directly harmed investors.
The framework and rules took effect on September 1. The framework is detailed in a specific section of the OSC’s website.
Disgorgement is a monetary sanction that compels respondents to pay to the OSC amounts secured due to non-compliance with Ontario securities law or commodity futures law. The Capital Markets Tribunal and the Ontario Superior Court of Justice may issue such orders.
Disgorgement order information such as amounts collected will be published on the OSC’s website under the new framework. Investors who sustained direct harm from the conduct spurring the order’s issuance may then provide their contact information for funds distribution announcements.
The framework aligns the OSC with local and global regulators that have effected similar initiatives. In addition to distribution information, the framework also allows investors to see new disgorgement orders and monitor the amounts collected for each order. Moreover, they may view the details of related distribution processes and the claims submission process.
The OSC unveiled the statutory framework back in June. At the time, its implementation was subject to Ontario Securities Act, Commodity Futures Act and Securities Commission Act, 2021 amendments.
Amounts obtained from disgorgement orders are only exempt from distribution if the disgorgement order was issued in response to a breach of the “insider trading and tipping” prohibition in Securities’ Act section 76 or if the cost of distributing the funds does not justify the move based on the amount received and the volume of potential affected investors.
A Superior Court of Justice-appointed third-party administrator may distribute the amount per a court-established process; the OSC may also do so in line with the process outlined in the OSC Rule 11-502 or OSC Rule 11-503 Distribution of Amounts Received by the OSC under Disgorgement Orders and Payment of Related Administrative Costs.