The OSC is divided, according to the Globe.

The OSC’s new chair, Heather Zordel, and the Ford administration are pushing for reform

The OSC's new chair, Heather Zordel
Heather Zordel

The Ontario Securities Commission (OSC) is not a happy family, according to The Globe this morning, following the appointment of Heather Zordel as Chair of the board of directors earlier this year. Heather is a long-time Tory donor and a Bay Street lawyer specialising in smaller issuers in the resource and technology sectors. Heather’s appointment is seen as part of the Ford administration’s efforts to “stamp the OSC with an anti-regulatory stamp.”

The Ford administration appears to prefer a “buyer beware” approach. According to what I’ve read about Heather, she’s a breath of fresh air, and all rational market participants should be overjoyed with her appointment. Heather, according to David S. Brown, partner at WeirFoulds, will view securities regulation through the “lens of entrepreneurialism, risk-taking, capital formation, and job creation.”

While the Globe article was informative, fair, and balanced, I have little doubt it was motivated by disgruntled Ontario Securities Commission apparatchiks who fear much-needed reform. The Ontario Securities Commission is dominated by large firm lawyers who, like Heather, have made a career out of assisting large banks, issuers, and fund complexes.

OSC Office

OSC CEO Grant Vingoe, for example, was most recently a partner at Norton Rose Fulbright, a top 20 global law firm. Heather previously served as a commissioner on the OSC panel that renders decisions in enforcement cases. Her tenure in that position was divisive, and some crybaby members have resigned now that she has been elevated to Chair of the OSC as a whole.

Heather was first brought to my attention by another Globe article highlighting how, in her previous role as a member of an adjudication panel, she had provided dissenting opinions in two cases. By OSC tribunal standards, this appears to be an unusual move: only one other dissent has been written in the last decade.

Gerald Ford- Ford Aministration

Heather’s dissent advocated for a stricter standard for what constitutes “material non-public information” in insider trading cases. Her other dissenting opinion concerned the issuer’s ability to deviate from the business plan outlined in the offering memorandum. Without comment on the respondents in the cases, who may or may not be angels, I thought both of Heather’s dissenting opinions reflected a pragmatic view of business decision-making reality.

Heather’s dissent work and capabilities were lauded by David S. Brown, senior partner at WeirFoulds. Heather’s appointment piqued the interest of veteran securities lawyer Philip Anisman. On the other hand, Philip Anisman has a unironic walrus moustache, so I’m not sure I’d trust his judgement.

The article raises some concerns about Heather acting to assist an issuer in trouble with the OSC while in a position of potential conflict of interest. The Globe also complains about the high fees she charged the OSC for her dissenting work (one of which ran to 88 pages).

Chair Heather is responsible for setting the OSC’s overall strategic direction and liaises with the Finance Minister. That’s Peter Bethlenfalvy, who has an interesting resume, having served as Chief Investment Officer of a $5 billion firm and President of TD Securities in the United States.

He previously vetoed an OSC proposal to prohibit certain mutual fund fees. The government also appointed four commissioners without consulting the OSC. Those who favour less regulation have reason to be optimistic.

I favour a “buyer beware” approach to securities regulation. All of the rules proposed by the OSC do not provide meaningful investor protection. Most market participants find perfectly legal ways to screw over investors. Finally, people will always find outlets for their speculative urges. People will gamble in real estate or cryptocurrency if securities are overly regulated.

People have lost billions of dollars in cryptocurrency, and the OSC has been largely powerless to intervene. And Bridging Finance engaged in a two-bit scheme right under the OSC’s nose, doing nothing until the losses totaled more than a billion dollars.

Greg McArthur and Andrew Willis wrote the Globe article, which is nearly 4000 words long and can be found here if you must.

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