The Ontario Securities Commission (OSC) has announced the release of final rules to implement its modernized statutory framework for distributing to wronged investors any funds it has collected under disgorgement orders.
“The new distribution framework provides investors who are harmed by misconduct that results in a disgorgement order with a streamlined and transparent framework to recover parts of their losses from amounts collected by the OSC,” said Naizam Kanji, the OSC’s general counsel and executive vice president, legal and governance, in a news release.
The OSC expects the new rules to come into force in late summer or early fall 2025, pending the effectivity of amendments to the Ontario Securities Act, Commodity Futures Act and Securities Commission Act, 2021.
Upon the rules coming into force, under the new framework, the OSC will dedicate a new section of its website to the disgorgement orders, according to the news release.
The website’s new section will enable investors to register their contact information if they want to receive notifications about possible distributions of disgorged funds collected under disgorgement orders. The new section will inform investors about what amounts the disgorgement orders have collected, whether the OSC has commenced a distribution, and how they can submit claims.
“While the OSC will also continue using no contest settlements and receiverships to return money to harmed investors in appropriate cases, this new process is an important addition to the OSC’s investor redress toolkit,” Kanji said in the news release.
The new framework aims to help implement the new distribution framework under the 2023 legislative amendments to the Ontario Securities Act, Commodity Futures Act, and Securities Commission Act, as well as align the OSC with Canadian and international regulators with similar frameworks.
In its news release, the OSC noted that the modernized statutory distribution framework reflects the insights gathered from stakeholder consultation.
On disgorgement
The OSC’s news release noted that disgorgement is a monetary sanction imposed by the Capital Markets Tribunal or the Ontario Superior Court of Justice.
The OSC explained that disgorgement sanctions require respondents to give up funds received due to their non-compliance with securities or commodity futures legislation.
In its news release, the OSC said it seeks to safeguard investors from unfair, improper, or fraudulent practices. It also aims to promote capital formation, a stable financial system, reduced systemic risk, and fair, efficient, and competitive capital markets.