Ontario Securities Commission (OSC)

Ontario Securities Commission (OSC)

The Ontario Securities Commission (OSC) is the largest securities regulator in Canada, enforcing securities laws in the province of Ontario. The Ontario Securities Commission (OSC) is the largest securities regulator in Canada, enforcing securities laws in the province of Ontario. The Ontario Securities Commission (OSC) regulates exchanges, alternative trading systems (ATS) and quotation and trade reporting systems (QTRS) in the province of Ontario. Like virtually all securities regulators, the OSC works to maintain market integrity and investor confidence by enforcing securities laws. While the OSC and IIROC have certain tools to put a damper on the short selling of a stock, they are typically averse to using them, fearing their interference may be more disruptive than the short campaign.

What Is the Ontario Securities Commission?

The Ontario Securities Commission (OSC) is the largest securities regulator in Canada, enforcing securities laws in the province of Ontario. As a crown corporation, the OSC is answerable to the provincial government of Ontario.

Understanding the Ontario Securities Commission (OSC)

The Ontario Securities Commission (OSC) regulates exchanges, alternative trading systems (ATS) and quotation and trade reporting systems (QTRS) in the province of Ontario. Like virtually all securities regulators, the OSC works to maintain market integrity and investor confidence by enforcing securities laws. Specifically, the OSC enforces the Securities Act and the Commodity Futures Act, both of Ontario.

The OSC develops securities rules by consulting with the Canadian public, advisory committees and international organizations. The commission is empowered to take a range of actions to enforce compliance with Ontario securities law. It can issue a cease trade order, order the restatement and refiling of financial statements, and add conditions to a registration. It can also, following an enforcement proceeding, impose sanctions and even fines, but recovering damages for defrauded investors is not within its purview.

The Ontario Securities Commission and SROs

The OSC currently recognizes two self-regulatory organizations (SRO), the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA). The three organizations divide up compliance review duties. The OSC reviews advisers, exempt market dealers, scholarship plan dealers and fund managers. The IIROC reviews investment dealers and futures commission merchants. The MFDA reviews mutual fund dealers. These regulatory bodies may subject a firm to a compliance review based on complaints, as part of a broad sweep or at random.  

Limitations of the Ontario Securities Commission

While the OSC’s mandate to “foster fair and efficient markets” may seem quite broad, there are limits on its ability to regulate in legal gray areas. For example, in 2017, Canadian markets were disrupted by illegal short and distort campaigns, in which short sellers spread false information to drive down the price of the stock they’re shorting. When investors demanded the OSC take action, the commission explained that there is often little it can do without specific evidence of intentionally fraudulent statements. That can be difficult to find, and in some cases, short-sellers are rattling markets without relying on false information at all. They are simply identifying a company they believe is overvalued and shorting it while actively campaigning for its price to drop. While the OSC and IIROC have certain tools to put a damper on the short selling of a stock, they are typically averse to using them, fearing their interference may be more disruptive than the short campaign.

Related terms:

Alternative Trading System (ATS)

An alternative trading system (ATS) is a loosely regulated venue for matching the buy and sell orders of its subscribers.  read more

British Columbia Securities Commission (BCSC)

The British Columbia Securities Commission (BCSC) is an independent government agency responsible for regulating securities trading in British Columbia, Canada. read more

Crown Corporation

A crown corporation is a corporation that is established and regulated by a country's state or government—mainly Commonwealth nations. read more

Investment Industry Regulatory Organization of Canada (IIROC)

The Investment Industry Regulatory Organization of Canada oversees investment dealers, brokers and trading activity in debt and equity markets. read more

Mutual Fund Dealers Association (MFDA)

The Mutual Fund Dealers Association (MFDA) is a Canadian regulatory body overseeing domestic distributors of mutual funds and exempt fixed-income products. read more

SEC Form ATS-R

Securities and Exchange Commission (SEC) form ATS-R is a required quarterly update filed with the SEC by alternative trading systems. read more

Short-Form Prospectus Distribution System (SFPDS)

The Short-Form Prospectus Distribution System (SFPDS) is a standard system Canadian regulators use to distribute changes to the prospectus for securities.  read more

Short and Distort

Short and distort refers to an illegal practice that involves investors shorting a stock and then spreading rumors in an attempt to drive down its price. read more

Self-Regulatory Organization (SRO)

A self-regulatory organization (SRO) is able to create and enforce industry regulations and standards by itself.  read more

Universal Market Integrity Rules (UMIR)

Universal Market Integrity Rules (UMIR) are a set of rules governing trading practices in Canada controlled by an independent regulator. read more