As director of enforcement leaves, OSC’s staffing dilemma grows

Analysis

Longtime director of enforcement Tom Atkinson is leaving the Ontario Securities Commission, the securities regulator revealed Wednesday.

While the move was not surprising given that rumours of Atkinson’s move to the Securities and Futures Commission of Hong Kong has been on offer in regulatory and legal circles, his departure is raising another issue that’s been hanging within the OSC for months: that the pending creation of a co-operative federal-provincial securities regulator is making the OSC a less appealing landing spot for talented employees.

“The problem – is that the co-operative regulator might come into operation at some indeterminate point, why commit to a situation with limited future prospects,” said one seasoned securities lawyer.

An interim replacement for Atkinson wasn’t immediately named, and it is expected only in “the coming weeks,” according to an early-morning news release from the OSC.

The veteran lawyer said the OSC is facing the same dilemma using the position of executive director, which hasn’t been filled since Maureen Jensen became chair of the OSC after the departure of Howard Wetston, who left the commission in November.

The short horizon isn’t the only complicating factor. After fifty years of attempting to unite Canada’s disparate patchwork of provincial and territorial regulators, great pains are now being taken to ensure participating jurisdictions don’t feel that players or even precedents from Ontario, the nation’s biggest and busiest capital market, dominate the new watchdog.

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As an effect, it may be argued that anyone who requires a senior job at the OSC must be either inside it for a while – or ambitious and assured enough to think they can grab a senior position among the fewer seats in the combined national-provincial regulator despite their berth at the OSC.

“There will be a scramble for all those positions,” the veteran securities lawyer said.

Industry sources say top contenders for that director of enforcement job at the OSC – if they’re willing – are Karen Manarin and Katie Daniels. Manarin is a lawyer and deputy director of enforcement, and Daniels worked in enforcement before moving to her job as deputy director of corporate finance.

The uncertainty about the timeline to do the job might “put people off,” particularly potential candidates away from commission, said an old regulator, who spoke on condition that he ‘t be named.



The politics at the office round the OSC and also the formation of the new co-operative regulator can be seen in the recent career trajectory of vice-chair Monica Kowal, who was briefly acting chair from the OSC after Wetston’s departure but who did not get the top job. That went to Jensen, 59, who had been appointed for any two-year term, which was viewed as non-threatening to efforts to bring provinces outside Ontario in to the fold of the co-operative regulator.

So far, Ottawa, the Yukon, and five provinces including Ontario and British Columbia, have committed to the Cooperative Capital Markets Regulatory System.

The official timeline suggested the brand new regulator would be operational in the fall of 2016, but there has been delays and industry players say a two-year timeline is more realistic.

In the meantime, some market watchers don’t expect a great deal will be done to enhance the OSC’s spotty enforcement record.

Despite key wins, like a contested insider trading case against former GMP Securities executive assistant Eda Marie Agueci, there have been noteworthy losses, like the complete exoneration of Jowdat Waheed and Bruce Walter, who faced insider-trading allegations associated with the takeover of Baffinland Iron Mines Corp.

Why commit to a position with limited potential customers?

And even though it is well known the wheels of justice can grind slowly, allegations from the principals behind Sino-Forest Corp. continue to wind their way through the OSC hearing process nearly five years after the disgraced timber company’s high-profile collapse amid fraud allegations.

Like other Canadian regulators, the OSC has additionally struggled to gather the financial penalties and disgorgement orders it imposes – even as those sanctions have become. Last year, for instance, the OSC’s collection rate was just 14.16 percent, based on a recent note written by Trevor Courtis and Rene Sorell at law firm McCarthy Ttrault LLP.

Despite the record, observers the OSC devoted significant resources to cracking down on market malfeasance under Wetston, who became chair this year, and Atkinson, who was named director of enforcement in ’09.

During their tenure, the OSC established some pot Serious Offences Team (JSOT) that mixes securities regulators and police to pursue criminal and quasi-criminal cases. The happy couple also presided within the introduction of two Canadian firsts in securities enforcement: no-contest settlements, and a proposed whistleblower program bolstered by the promise of dollars for solid information.

Financial Post

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