OSC to review TMX-LSE deal

“Let me make it clear, that we will review all aspects of the transaction including the proposed structure to ensure that we are satisfied that any changes are in the public interest,” he said.

When asked how he defines public interest, Wetston said: “I can’t define the public interest, but I sure know it when I see it.”

The OSC has a key role in reviewing the transaction in its capacity as the lead regulator of the TMX group.

“The TMX-LSE transaction will require the commission to review a number of significant regulatory issues,” he said. “We will publish the TMX-LSE application and a notice for a public comment period and encourage submissions from all interested parties.”

In addition, a public hearing will be held in order to receive submissions from interested parties.

“Fundamentally,” said Wetston, “this transaction raises important policy issues for the OSC.”

It may be noted that the Ontario government announced yesterday that it is forming an all-party committee of MPPs to consult on the transaction.

“Depending on the focus of the legislative committee, its report may indeed inform the commission’s deliberations with respect to the issues it needs to consider during its review.” The OSC’s comment period and public process will commence soon thereafter.

During our review process the OSC will coordinate “to the extent possible” with other CSA jurisdictions that are reviewing the transaction.

Alberta is the lead regulator on the NGX Natural Gas Exchange; Alberta and B.C. are lead regulators on the TSX Venture Exchange and the AMF is the lead regulator on the Montreal bourse.

“We will also have discussions with Britain’s Financial Services Authority about the proposed oversight model and cooperation,” he added.

Wetston assured that this existing share restriction will be one of the considerations in the regulator’s review of the transaction. A party must receive the OSC’s prior approval to acquire more than 10% ownership of the voting shares of the TMX group.

“The TSX plays an important role in our markets as a market infrastructure entity,” said Wetston. “Not only does it provide a trading facility but it has a listed issue of regulation function and contributes importantly to capital raising.”

The TSX and TMX group operate under a recognition order granted by the OSC. The order establishes the principles under which the TSX and TMX Group must operate and address matters such as corporate governance.

Wetston said the OSC is closely watching the massive exchange consolidation activity happening internationally and its consequences for Canadian capital markets.

OSC supports national regulator

Wetston used the platform to pledge the OSC’s support to the proposed national securities regulator. “I’d like to reaffirm the policy support for the creation of a national securities regulator for Canada; in my opinion the acceptance of a national regulator will depend on its capacity to be innovative, flexible and reflective of local concerns and expertise.

The model proposed by the Canadian Securities Transition office takes these matters into account, he added.

While praising the work of the CSA, he stressed that the range of issues confronting regulators today suggest an accountability framework which can only be effectively accomplished by a Canadian securities regulator.

Acknowledging the sweeping changes occurring in the capital markets, he underlined the need for regulators to “be willing to change established paradigms of the role and parameter of securities regulations as existing concepts no longer provide adequate protection to investors.”

Tough talk

Defending the agency’s enforcement regime, often the most criticized program at the OSC, Wetston said any enforcement system must be vigorous and effective and must be seen as such.

Pointing a cautionary finger at those involved in illegal trading, he said “we have upped our game to shut their boiler rooms…we are also targeting fraudulent securities offerings with new vigour.”

The addition of anti-fraud and anti-misrepresentation provisions to The Securities Act has afforded the OSC more flexible tools to detect and prosecute illegal distributions.

The commission intends to bring more proceeding before the Ontario Court of Justice, particularly those involving repeat offenders. He said the OSC’s objective is to bring forward meaningful cases that have strong deterrent impact in order to protect investors and the markets. “We aim to maximize the deterrent effect of court-imposed sanctions, including jail terms, where appropriate.”