OSC Enforcement- Ethnic minorities are Unfairly Singled out

The Ontario Securities Commission (OSC) primarily targets Asians and Jews. Alternatively, vice versa. Who can say?

With my interest in securities regulation, I’m afraid I’m going to alienate some of you. So I thought I’d start with a lighthearted piece about how, over the last five years, more than half of the people hauled into court by the OSC were ethnic minorities, primarily South Asians, East Asians, and Jews. Court proceedings are at the harsher end of OSC sanctions, referred to as “quasi-criminal” charges by the OSC. 

According to an OSC manual, when “all other reasonable options have been carefully considered and executive approval has been obtained,” court proceedings are initiated. This short excerpt clearly demonstrates the predominance of minority names:

OSC Enforcement

If you want to double-check everything, the full list is available here. I went through the list beginning in November 2016, the start of the current Enforcement Director, Jeff Kehoe’s tenure. This is an arbitrary cutoff designed primarily to obtain a representative sample: 52 different people were hauled into court during that time period. Based on names, I counted 29 ethnic minorities (or a 55% ratio). 15 (28% of the 52) were South or East Asians.

I had to make assumptions based on names because I couldn’t request DNA samples. I basically labelled people as either minority or white. A Dutch or French-Canadian sounding name, for example, would be classified as white, despite the fact that both are minorities.

I looked up this statistic because it reminded me of stories I’d read over the years. I doubt anyone at the OSC is lying awake at night thinking about how to reach out to more minorities. Even so, it took me a while to come up with possible explanations. I am not used to thinking about ethnicity because I am the world’s second least racist person. The best explanation I could think of is that certain ethnic groups may be overrepresented in commercial activity.

According to Industry Canada, 33% of startup owners were born outside of Canada. Being involved in business or trading is a prerequisite for falling foul of securities law, so this is the target audience. Securities fraud, unlike shoplifting or carjacking, is a more cerebral activity. Asians and Jews account for 40% of Harvard’s student body. These are the fundamental facts of life.

That, I believe, is a start, but not a complete explanation. Perhaps the OSC has gotten so good at pursuing a specific type of small-scale ethnic affinity fraud that when they see an ethnic name in a file, their eyes light up.

You may be wondering: could a secondary factor be that different communities have different commercial cultures – for example, bribes are a routine aspect of business in some countries? Are you insane? This is not something we can discuss in 2022. Let the record show that I immediately rejected your suggestion and believe that all people are equal, except in minor, insignificant ways, such as Cubans being very good at baseball. I also believe in diversity because different people bring different perspectives even though everyone is the same.

I think it’s much more noteworthy that the OSC mostly just catches minor offences, such as bike thefts. The same thing happens in tax collection. The majority of criminal tax evasion cases involve small businesses, such as plumbers or restaurant owners. I’ve never heard of anyone being charged criminally for stashing money offshore. However, I have no doubt that this was common in the past when controls were lax.

I came across the term “performative allyship” a few weeks ago, which is part of the woke vocabulary. I had a hard eye roll when I read it, but I think it’s a useful term. The OSC’s messaging is unmistakably progressive. Many OSC executives use pronouns. The OSC mentions “indigenous reconciliation” in its priorities statement. Of course, the OSC is famously pursuing David Sharpe of Bridging Finance, who has made public his Mohawk heritage.

The real question is why the OSC took so long to act. I believe the OSC is more concerned with power dynamics than with ethnicity. I believe that if you dress the part, work in big offices, and hire expensive lawyers, the OSC will be deferential. However, if you run a shady operation, use inexperienced lawyers, or have linguistic barriers, the OSC will bully you. Bridging was allowed to continue for so long because it had all the trappings of a legitimate Bay Street operation. Some even get away completely.

I don’t know the ethnic composition of the enforcement division. However, the OSC as a whole is quite diverse. Using the same methods as before, I estimate that more than half of the OSC leadership is an ethnic minority.

The OSC has strayed far from its original mission and is now pushing social engineering agendas that require board diversity. Given the statistics presented above, the OSC is well placed to recognise that even perfectly neutral rules implemented by well-meaning people can result in unequal outcomes. Only two of the 52 people charged were women.

Women are either bad at deception or very good at avoiding detection. Maybe it’s patriarchy, or how parents raise their daughters. Sociological questions are never easy to answer. Another plus is that I’ve never seen the OSC go after a Black person. On the other hand, they are not to be found in the OSC leadership. I am happy to shine a light on these facts and I’ll leave people who are obsessed with identity politics to figure it out.

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