OSC to accept 'no-contest' settlement agreements

CBC News Posted: Mar 11, 2014 3:57 PM ET Last Updated: Mar 11, 2014 5:25 PM ET

The Ontario Securities Commission has decided to let some individuals and companies settle misconduct disputes with the regulator without formally having to admit to any wrongdoing.

The new policy, often referred to as a no-contest settlement, is aimed at speeding up the whole enforcement process.

Under the old rules, the OSC required some admission of wrongdoing before a settlement could take place. That made for often difficult negotiations as defence lawyers worried that such admissions could leave their clients more vulnerable to other legal action from shareholders. 

The OSC says its staff are continuing to explore the possibility of introducing a whistleblower program that would reward tipsters who provide the OSC "with actionable information about misconduct in the marketplace." 

The OSC said it would be up to the commission to accept or reject any proposal to settle a case with a no-contest agreement.

The commission says serious cases of wrongdoing — including cases of abusive, fraudulent or criminal conduct — will still require formal admissions of misconduct. A no-contest settlement will also not be allowed in cases where the accused "misled or obstructed" staff during the investigation.?

"When heightened accountability from respondents is paramount, we will continue to seek admissions as part of any proposed settlement agreement,"? said Tom Atkinson, the OSC's director of enforcement, in a statement.

An investor protection advocacy group says it has some misgivings about the new policies. 

"We're concerned that they (the policies) may have the overall effect of reducing deterrents and end up being viewed . . . (by) wrongdoers as a licence fee for wrongdoing," said Neil Gross, executive director of the Canadian Foundation for Advancement of Investor Rights (FAIR). 

"You can pay a fine and be on your merry way."

The OSC said it assessed more than $80 million in administrative penalties, disgorgement orders and settlement amounts in 2012-13.

No-contest settlements have been a hallmark of U.S. securities policy for many years. The U.S. Securities and Exchange Commission often reaches huge settlements with targeted companies or individuals without them having to formally acknowledge wrongdoing.  

That has been controversial. In 2011, for example, a U.S. federal judge rejected a $285-million US settlement that Citigroup reached with the SEC, in part because the financial giant was not required to admit any guilt.

The SEC had accused the bank of betting against a complex mortgage investment in 2007 — making $160 million US in the process — while investors lost millions.

With files from The Canadian Press Mar 12, 2014 4:41 PM ET Mar 12, 2014 4:34 PM ET Mar 12, 2014 4:15 PM ET Mar 12, 2014 4:34 PM ET Mar 12, 2014 4:41 PM ET

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Ottawa's 'dangerous' meddling biggest threat to housing: economist

Canada's hot housing market isn't in bubble territory, according to a new report which argues that it's the federal government's "dangerous" tightening of mortgage rules that poses the biggest threat to home prices.

That view, from housing market economist Will Dunning, runs contrary to many readings of Canada's housing sector.

Many analysts have examined the state of housing in this country and declared it overheated, overvalued, and ripe for a tumble in prices as soon as interest rates begin to rise.

Nonsense, says Dunning, who runs a real estate market research firm and frequently consults for the mortgage industry. 

For one thing, he dismisses some of the data that groups like the OECD have used to justify their diagnosis of a housing bubble as "badly flawed." 

The OECD report found that based on the ratio of house prices to rents, Canadian real estate is overvalued by as much as 60 per cent. But Dunning says the particular house-price-to-rent ratio used is inaccurate because it overestimates house price growth and underestimates the pace of rent increases. 

'Government actions to slow the housing market are not only unnecessary. They are also dangerous.'- Housing economist Will Dunning

Looking at house prices, Dunning says there is room to accommodate a sizable increase in house prices of as much as 25 per cent over the next two years, along with a rise in interest rates of as much as one percentage point from current levels.

"Rather than being overvalued, house prices in Canada are fairly valued, and they may even be undervalued," he writes in a report released Wednesday.

Dunning instead argues that it is Finance Minister Jim Flaherty who has created "dangerous" conditions for the housing market by tightening mortgage rules on four separate occasions.

"Government actions to slow the housing market are not only unnecessary," says Dunning. "They are also dangerous."

He says the most recent change, to eliminate 30-year amortizations for insured mortgages, "took demand out of a housing market that was already in a state of balance." He likened the effect of that one rule change to a one percentage point increase in mortgage rates.

"The deliberate reduction of housing demand, which is now clearly visible in the new and existing arenas, creates a risk that prices could fall, unnecessarily. Once prices start to fall, the outcome is unpredictable," he writes.

Dunning's report comes as a closely-watched indicator showed Canadian housing prices hitting a record high. The Teranet-National Bank composite price index rose 0.3 per cent month-over-month in February, led by gains in Western Canada.

Over the last 12 months, the index has increased by 5.0 per cent nationally. Prices in Calgary rose 9.6 per cent year-over-year and in Vancouver by 7.7 per cent. Toronto prices were up 6.1 per cent. 

But some markets saw year-over-year drops. Prices in Victoria fell 3.4 per cent, Halifax dropped 4.7 per cent and Ottawa-Gatineau slipped 0.6 per cent.

The Teranet-National Bank index tracks average home prices in 11 metropolitan markets based on data collected from public land registries.

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Fuel costs to trim record airline profits

Rising jet fuel prices will eat into the world's airline profits, but the industry is still on track for a record year, an airline lobby group forecast Wednesday.

The International Air Transport Association, which represents 240 airlines, forecasts that the global airline industry will earn a profit of $18.7 billion in 2014. That's a record. But the figure is $1 billion lower than its previous profit estimate in December.

North American airlines are expected to be the industry's biggest profit driver, with record 2014 profits of $8.6 billion. That's more than double the previous most profitable year — 2010's $4.2 billion.

The Geneva-based group now forecasts that fuel will average $108 US a barrel, up $3.50 from previous projections.

That will add $3 billion to the industry's fuel bill this year — a figure that will be partially offset by stronger demand in passenger and cargo traffic as the global economy recovers.

"“In general, the outlook is positive," said IATA director general Tony Tyler in a statement. "The cyclical economic upturn is supporting a strong demand environment. And that is compensating for the challenges of higher fuel costs related to geopolitical instability."

But he said industry returns remain at an "unsatisfactory level with a net profit margin of just 2.5 per cent." 

Tyler credits industry consolidation and joint ventures with helping to improve the bottom line.

Industry revenues are expected to total $745 billion this year, with average profit per passenger of $5.65.

Besides rising fuel costs, the airline industry also points to such geopolitical risks as the decision by Venezuela to prevent airlines from taking profits out of the country and the crisis in Ukraine.

The disappearance of Malaysia Airlines Flight MH370 over southeast Asia is, at this point, another unknown.   

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