Distributes funds from disgorgement orders to affected investors now managed under new OSC framework
Ontario Securities Commission (OSC) Establishes New Framework for Distributing Disgorgement Orders
The Ontario Securities Commission (OSC) has published final rules to facilitate the distribution of disgorgement orders to harmed investors, providing a clear, structured process focused on reimbursing investors who suffered financial losses because of securities violations.
The rules, published on June 12, 2025, establish a statutory framework that requires money recovered through disgorgement orders to be distributed directly to harmed investors, unless one of three limited exceptions applies. These exceptions include violations involving insider trading and tipping prohibitions under section 76 of the Ontario Securities Act (OSA).
The new framework formalizes the legislative change introduced by the Ontario government in November 2023, mandating disgorgement proceeds be paid out to investors harmed by breaches under the OSA and Commodity Futures Act (CFA). The rules are expected to come into force in late summer or early fall 2025, contingent on complementary legislative amendments to the relevant statutes.
The OSC received submissions from eight commenters who supported the proposal to modernize the framework for distributing disgorged funds to harmed investors. The final rules provide a framework for the payment of administrative costs associated with the distribution of disgorged amounts.
Once the full sum of money received under a disgorgement order has been fully distributed, the OSC must publish a report within 60 days containing information in connection with the money distributed. Upon receiving non-exempt disgorgement money, the OSC must publish notice on its website and set out the claims process for eligible applicants.
Payments to eligible applicants may be made either by a court-appointed administrator or by the OSC itself. Eligible applicants must submit an application detailing their direct financial loss and supporting evidence within the claims period.
The new statutory regime and final rules may have implications for securities class actions, potentially increasing the attractiveness of resolving matters with the regulator. Regulators and governments continue to seek to strengthen the redress available to harmed investors and consumers as a key component of their mandate.
The final rules and associated companion policies provide the regulatory framework to implement these legislative amendments. They incorporate feedback received from this public review and commentary, aiming for clarity, fairness, and practicality in fund distribution mechanisms.
The exceptions include money received in violation of section 76 of the OSA, amounts too small to justify the cost of distribution, and decisions giving rise to the disgorgement order that are still under appeal. The OSC will not distribute funds until all claims have been considered and the amount to be paid to each applicant has been quantified.
This new framework enhances investor protection by ensuring recovered ill-gotten gains are returned to those harmed, rather than being retained by the regulator for other uses. The authors of the article are Lawrence E. Ritchie, Sierra Farr, and Kate Leblanc.
- The new framework established by the Ontario Securities Commission (OSC) aims to reimburse investors who have incurred financial losses due to securities violations, thus contributing to the capital markets as it provides a structured process for distributing disgorgement orders, which can be considered a part of business and finance.
- The final rules published by the OSC provide a framework for the payment of administrative costs associated with the distribution of disgorged amounts, demonstrating the commission's commitment to strengthening investor protection in capital markets, an essential aspect of business and finance.
