28 | Securities Enforcement
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The amendment expanding the OSC's
powers to share information is one of a
trio of changes tucked into a large budget bill that came into effect this summer
with little media attention.
The disclosure provision is the one
causing the most consternation because
it authorizes the OSC to share compelled
evidence, provided under order, with law
enforcement and regulatory agencies at
home and abroad without having to notify those being investigated beforehand.
While the OSC always had the right to
disclose information to the US Securities
and Exchange Commission and others, it
was required first to inform the party who
provided the testimony so they could request a hearing if they objected or ask for
appropriate safeguards. Not any more.
"This should be of concern to all Canadians," says William Brock, a litigator at
Davies Ward Phillips & Vineberg LLP in
Montréal. "With these changes, once you
give information to the securities commission you lose control over it. The commission can do a number of things with
the information they obtain – in many
cases without the consent and without
even informing the targets – including
sharing it with the SEC.
"The SEC has its own powers and
can give your information to whoever it
wants, including the US Justice Department. So you just don't know where your
information is going to end up."
Québec has a similar disclosure provi-
sion, says Brock, and there are real ramifications for those placed under securities
investigation, even when their information stays in Canada. It can be shared with
the Canada Revenue Agency, for example.
John Keefe, a securities litigator at
Goodmans LLP in Toronto, says Ontario's expanded disclosure provision clearly
creates an entirely new level of risk for
anyone placed under OSC investigation.
The commission has broad powers to
subpoena people and compel them to
submit to examination under oath, while
forbidding them from disclosing the fact
they are even being investigated.
"It has almost a star-chamber quality
to it. The process can be quite draconian,"
says Keefe. "One of the protections that
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