RIP OSC IAC

[Bylo Selhi]

Way back in Nov05 this thread, OSC announces members of advisory committee, started with the following before it got hijacked by the usual suspects.

OSC Announces Membership of Investor Advisory Committee

The mandate of the IAC is to provide advice and guidance on any aspect of the OSC that has an impact on investors. IAC members will help identify and address issues affecting investors, and ensure that the views of consumers of financial services are accessible to the Commission.

Members:
Eric Kirzner (chair)
William Gleberzon
Robert Goldin
John Hollander
Gloria Hutton
Richard Manicom
Poonam Puri
Pamela J. Reeve
Kelly Rodgers
Ellen Roseman
Whipple Steinkrauss

Well, the IAC died last December and it seems that no one, not even its own members, had any involvement even in that decision. Here's what one of them, having managed to partially dislodge the OSC muzzle, has to say...

Who speaks for investors?

I’d love to see stronger regulation of stockbrokers, mutual fund sellers and commision-based financial planners, but I’m not confident anything will change.

Here’s the problem: No one listens to ordinary investors. Canada’s securities regulators set up task forces to study what should be done for investors. But do they include investors on these task forces? Almost never. The most recent example of exclusion is the Purdy Crawford-led committee working to restructure asset-backed commercial paper.

The Ontario Securities Commission decided to break the tradition. In 2005, it announced the formation of an investor advisory committee to give direct input on important issues. I was one of 10 people selected for a two-year term.

Our term ended last December and we agreed not to talk publicly about what went on behind closed doors. So I’ll just say this: We didn’t accomplish much. We were more like a focus group than a policy-making body. We never put out any reports on what we were doing or discussing — though we did try. We were divided about many issues and rarely reached a consensus. Still, it was a useful exercise.

The OSC didn’t announce new committee members after our term ended. Nor did it consult us. So I was surprised to see a story in this month’s Investment Executive about what it planned to do to replace us. Basically nothing. The experiment is over.

Instead of listening to a committee of investors, the OSC and self-regulatory organizations will listen to each other. They will talk about issues that concern investors — and invite a few investors to chat from time to time — and that’s all.

Here’s how OSC vice-chair Larry Ritchnie justifies the decision:

The IAC was “extremely useful” but it had “run its course.” Regulators have decided to try something new and, hopefully, better.

This new approach will represent progress because it brings together the four primary organizations with responsibility for retail investor protection; it will also aim to generate investor input from a broader array of voices than a formal investor committee can produce.

There is no one voice for retail investors. We are all retail investors.

Come on, guys. You’re retail investors second and industry insiders first. You’re the last people I’d expect to understand what happens to the dairy farmer from Nova Scotia who hands over the first substantial sum of money he’s ever had to a commission-hungry snake in a suit.

It seems to me there are many articulate people who can speak for investors. There’s no lack of input. The bigger question is: When will the regulators and SROs start listening to investors? And taking action on what they’re told?

When indeed.

[squash500]

Bylo, it seems that Kelly Rodgers is quite an investor advocate in her own right . It's too bad that this whole thing was scrapped. Thanks for posting this .

[Chuck]

Instead of listening to a committee of investors, the OSC and self-regulatory organizations will listen to each other. They will talk about issues that concern investors — and invite a few investors to chat from time to time — and that’s all.

I'd be surprised if they even do that. They will probably talk about issues that concern the self-regulatory organizations. Issue #1 being: "How can we minimize regulation in order to maximize profit."

I was going to list issue #2 as: "How can we continue to propogate the illusion that we are really self regulating regarding investors best interests." But it appears that issue has already fallen off the table.

[parvus]

When indeed.

I guess you've forgotten (or perhaps missed in the first place) this indication of OSC sympathy:

Over the centuries, a great deal has been written about the subject of ethics. Here's what two of the century's most illustrious citizens had to say on the subject.

Albert Schweitzer once wrote:

"The first step in the evolution of ethics is a sense of solidarity with other human beings."

Ayn Rand also wrote:

"Ethics is a code of values which guide our choices and actions and determine the purpose and course of our lives."

In light of those remarks by one of the 20th century's noted humanitarians and one of its more noted philosophers, consider these five scenarios:

The scenarios that follow are actually quite good, but if you're trying to frame securities regulation as a combination of humanitarianism and Howard Roark's right to blow up buildings ...

1. A mutual fund dealer who presents himself to his clients as a financial advisor is, in fact, marketing limited partnerships of questionable value. In doing so, he makes multiple misrepresentations to his clients about the investments, including failing to disclose his personal interest in the partnerships. He also fails to disclose in required documentation the commissions and other benefits paid to him by the partnerships. Most of the investors lose significant sums of money.

2. Two well-known and highly successful fund managers are made aware of interesting investment opportunities and decide to invest personally, outside of the funds which they manage. In one case, the manager provides false information on a document in order to qualify for the private placement. In the other, the manager makes a false statement to the OSC investigators who are looking into the transactions.

3. Brokers and the firms for which they work become involved actively as both agents and principals in the buying and selling of shares in companies in which they have a direct involvement. That involvement is not disclosed. The shares soar spectacularly but just as quickly they tank.

4. A fund manager agrees to have two of its mutual funds buy a security underwritten by a dealer that is affiliated with it. The new securities are being issued to finance sales commissions on the sale of units in the mutual funds. The affiliate dealer needs to have additional purchasers of the securities in order to close the deal. The mutual funds buy the security, which later loses over half its value.

5. Three respected businessmen who are officers and directing minds of a public company, one of whom is also a senior lawyer knowledgeable in securities law, and another, a chartered accountant, during the course of their takeover bid for the company in which they have an insider relationship, do not disclose to public shareholders on the "sell" side of the deal, views which they have shared with the "buy" side; informed views as to the true potential revenues for the company and consequently the true share value.

These examples reflect a decided lack of solidarity with other human beings and questionable codes of values. As a direct consequence of that lack of solidarity and those questionable codes of values, I might add, each of the parties in the above examples has paid a very significant price.