The Ontario government is set to strengthen regulatory enforcement, supporting measures against abusive short selling and promoting long-term asset funds for retail investors.
In its latest provincial budget, the government announced it will raise maximum administrative penalties for regulatory breaches to $5 million from $1 million and double the maximum fine for quasi-criminal offences to $10 million to deter misconduct in capital markets. These increases follow recommendations from the Capital Markets Modernization Taskforce’s 2021 final report.
The government also plans legislative changes to grant the Canadian Investment Regulatory Organization (CIRO) authority to compel evidence in enforcement investigations and provide statutory immunity to its staff for good-faith actions.
CIRO has long sought such immunity, which it already has in several provinces, along with enhanced powers to gather evidence during enforcement proceedings.
“As a public interest regulator, these new enforcement tools will enable us to provide stronger protection to investors,” said Andrew Kriegler, president and CEO of CIRO, in a release.
If enacted, Ontario would become the seventh province to grant these powers, joining Alberta, Quebec, and the Atlantic provinces.
The budget also expressed support for the Ontario Securities Commission (OSC) and CIRO’s efforts to address concerns about the short selling regime.
“As part of this work, CIRO has proposed a mandatory close-out requirement designed to mitigate the occurrence of failed trades while the OSC is working on proposed rule amendments to prohibit short selling in connection with a prospectus offering or private placement,” the government noted.
“These measures would help mitigate potential stock price manipulation and support junior mining companies listed on Ontario stock exchanges,” it added.
The budget further endorsed recent OSC and provincial regulator initiatives aimed at simplifying the process for companies to go public and raise capital, referencing the OSC’s consultation on long-term asset funds. “The government supports options for interested retail investors to diversify their portfolios and looks forward to the OSC’s next steps,” it said.
Finally, the government plans to consult on proposals that would allow credit unions to raise capital by selling shares to non-member investors.
“This would allow credit unions to access public and private capital markets, providing them with long-term sources of capital,” the budget stated.