Increased Authorities: Is the CIRO now utilizing 'legislative' powers?
In a significant move to strengthen regulatory compliance and investor protection within Canada's capital markets, Bill 24 has been passed, amending legislation governing the Canadian Investment Regulatory Organization (CIRO).
Bill 24 refers to amendments made to the Commodity Futures Act and the Ontario Securities Act that expand CIRO's enforcement capabilities and raise penalties. Key changes include:
- Expanded enforcement powers allowing CIRO to more effectively investigate and sanction regulatory contraventions in the investment industry.
- Increased maximum administrative penalties for breaches of CIRO rules, enabling more substantial financial consequences.
- Higher fines for quasi-criminal offences, which are offences that carry legal consequences akin to criminal penalties but are handled in a regulatory context.
These enhancements are intended to improve investor protection and increase deterrence against non-compliance.
The amendments align with the recommendations set out in the Capital Markets Modernization Taskforce's final report published in January 2021. One of the key recommendations was the modernization of Ontario's short selling regulatory regime. As a result, the Ontario Securities Commission (OSC) is developing rules to prohibit short selling connected to prospectus offerings and private placements.
The changes to CIRO's enforcement powers include the ability to compel evidence during investigations, granting statutory immunity to certain CIRO employees, increasing maximum administrative penalties, and imposing new requirements under Ontario's short selling rules.
However, the new powers of compulsion granted to CIRO may impact its ability to share compelled investigation materials with statutory regulators and law enforcement agencies. The confidentiality provisions for compelled witnesses, which have been a cornerstone of the OSC's powers of compulsion since 1994, are not included in the amendments.
The amendments also increase the maximum administrative penalty for non-compliance with securities legislation and commodity futures law from $1 million to $5 million. Additionally, the maximum fine that may be imposed for a quasi-criminal offence under commodity futures law and Ontario securities law has been increased from $5 million to $10 million.
The Government of Ontario acknowledges that CIRO's mandatory close-out requirements would help mitigate potential share price manipulation. The amendments to Ontario's short selling regulatory regime aim to address this issue and modernize the regime, following the recommendations of the Capital Markets Modernization Taskforce.
The Canadian Investment Regulatory Organization (CIRO) was formed on January 1, 2023. The organization operated as a self-regulatory organization (SRO) with authority largely based on contract before the amendments. The changes aim to provide CIRO with a more robust legal foundation to carry out its regulatory functions effectively.
In summary, Bill 24 represents a significant step forward in strengthening regulatory compliance and investor protection within Canada's capital markets. The changes to CIRO's enforcement powers, increased penalties, and modernization of Ontario's short selling regulatory regime are expected to improve market integrity and deter non-compliance. For the latest and precise details of Bill 24 regarding CIRO, you would need to consult official government publications, CIRO announcements, or recent legislative summaries directly related to this bill.
The changes in Bill 24, including enhanced enforcement powers and increased penalties, are aimed at boosting regulatory compliance and investor protection within the finance and business sector, specifically the capital markets industry and investing. These amendments are aligning with the recommendations from the Capital Markets Modernization Taskforce in their report published in January 2021.
