Editorial: A regulator regulates

As a national securities regulator seems ever more likely, the OSC finally shows it can get tough on enforcement.

The Ontario Securities Commission is finally showing some teeth now that it may be facing extinction. First, on Jan. 23, the regulator forced HudBay Minerals Inc. to get shareholder approval for its proposed takeover of Lundin Mining Corp., a rare overruling of the Toronto Stock Exchange. Two weeks later, the OSC punished Research In Motion Ltd. execs and directors for back-dating options by settling on a whopping $77-million penalty.

Let’s forget for the moment that RIM actually did the investigation, not the OSC, and it was a shareholder who brought the matter to the company’s attention, not an eagle-eyed securities officer. And let’s also forget that some believe Jim Balsillie, Mike Lazaridis and co. should pay more — or perhaps even resign. The fact is, the OSC has rarely been this active in defending shareholder rights.

In the first case, HudBay was hoping to pay for its purchase of Lundin by issuing nearly 158 million shares, thus diluting the company’s market value by more than 100%. The OSC ruled that several aspects of the transaction raised serious concerns about the fairness of the deal for existing HudBay shareholders.

In the second, RIM’s execs were caught with their hands in the options cookie jar, costing the company US$250 million in restated earnings. The OSC found that “RIM repeatedly made statements in many of its filings…that contained the misleading or untrue statement that options were priced at the fair market value of RIM’s common shares at the date of the grant.” For that, it fined the co-CEOs and two others. Balsillie and Lazaridis have already paid $15 million toward RIM’s $45-millon investigation.

It’s the kind of actiotn we’ve been waiting to see from the OSC — or, for that matter, any Canadian regulator — for years. It’s also the kind of action that we expect to see from a national regulator, which finally seems to be closer to reality. Ironically, if the OSC had exhibited such zeal in the past, calls for its replacement might not have been as loud. It really is too bad it’s taken this long to demonstrate some bite.