www.lexpert.ca | LEXPERT • December 2014 | 25
SECURITIES ENFORCEMENT
PHOTO:
REUTERS
IN SECURITIES
ENFORCEMENT
IT MAY SURPRISE some people to learn just how closely the battle between US
District Court Judge Jed S. Rakoff and the US Securities and Exchange Commission over the
no-contest settlement with Citigroup Global Markets was followed by Canada's most infl uen-
tial market regulator.
But when it comes to enforcement, the Ontario Securities Commission usually tries to move
in lockstep with – or at least not counter to – the United States to minimize the chances of
jurisdictional arbitrage.
at's what makes its decision to introduce no-contest settlements north of the border so
interesting. It puts the OSC off side the trend in the United States, says Jeff rey Leon, a litigation
partner at Bennett Jones LLP in Toronto.
"Ontario is saying we should allow no-contest settlements where it makes sense to do so while
I have the impression US regulators are going in a whole diff erent direction, pulling back on
when and if they'll use them because of judicial criticism and public concern."
In Canada, as in the US, no-contest settlements have come under fi re from investors and
activists who allege they help corporations escape the consequences of fi nancial misdeeds by
keeping evidence of wrongdoing out of the public record and away from shareholders' lawyers.
e OSC introduced the new regime before an appeals court eventually reversed Judge
Rakoff 's decision.
It's not as though staff was unaware of the Citigroup controversy. e regulator acknowledged
it had studied the implications for Ontario of Judge Rakoff 's decision, and it even published a
paper highlighting key diff erences between the OSC and the SEC settlement regimes.
Canadian securities regulators
have diverged from their US
counterparts in recent initiatives
BY SANDRA RUBIN
A DIVERGENCE
