Thrilla in Manila 

It may not be “Smokin’ Joe” v. The Louisville Lip”. But hopefully MacIntosh v. Waitzer may supply at least some dry-as-dust securities lawyers with a moment or two's entertainment. 

In his second attack on my defense of Heather Zordel’s appointment as Chair of the OSC Board of Directors, Ed Waitzer not only claims that I repeatedly miss the mark, but that I do so in a way that would embarrass any reasonably savvy law student. He even says that I was “disingenuous”. Hmmm.

In fact, it is Ed who, like Sancho Panza, continues to tilt at windmills. In his initial critique, Ed stated “As the Globe article noted, following a negative recommendation of five of the eight part-time commissioners, in early 2021 Heather Zordel was not reappointed by the Ontario government as a part-time commissioner”.  In his second critique, Ed continues to deny that this tells the reader that Ms. Zordel was deliberately not re-appointed (as opposed to taking herself out of the running because of her busy legal practice). He says “I simply observed that her appointment was not renewed (and, in very short order, she re-applied). Words matter.”

Yes, indeed they do, and the most natural and logical interpretation of the above-quoted sentence from his initial critique – and the one embraced by 9 out of 10 Certified Logical Poohbahs - is that Ms. Zordel was not reappointed because of the negative recommendations of her fellow commissioners. This is the natural outgrowth of the juxtaposition of “following” with “was not reappointed” (not to mention the fact that the latter phrase, by its nature, implicitly rules out a voluntary stepping down).

Indeed, later on Ed contradicts himself by endorsing the view that it was indeed the government’s decision not to reappoint Ms. Zordel, rather than her own decision not to reapply because of the demands of her busy legal practice. He notes that in 2019 the government and the OSC entered into a memorandum of understanding (MOU) that defines the respective roles of government and regulator. He then states that “it appears that the minister adhered to this [MOU] in considering the views of a majority of the then-incumbent commissioners who opposed the reappointment of Ms. Zordel as a part-time commissioner.”

Equally puzzling is Ed’s endorsement of the following sequence of events. First, in February 2019, the government thumbed its nose at the OSC by appointing Ms. Zordel as part-time commissioner without consultation. Then, in February of 2021,  ostensibly as a result of the aforementioned MOU, kowtowed to the will of the OSC in not reappointing her as part-time commissioner. And finally, in March of 2022, the government returned to its evil OSC-trashing ways by appointing her as Chair of the Board (despite the aforementioned MOU, which was supposed to have brought the government to heel). A more consistent and internally logical story would better advance his case.

Ed takes me to task for not mentioning the MOU signed by the OSC and the Ontario Government. But to the extent it has any bearing on the issues at hand, it favours my argument, not his. One purpose of the MOU was to ensure that “the regulatory and adjudicative decisions of the Commission must be made and be seen by the public to be made in an independent and impartial manner.” But in fact the lion’s share of the MOU is aimed at a rather different purpose, which was to remind the OSC who’s boss.

Thus, in conformity with the Securities Act, the MOU expressly reserves to the government the responsibility for “setting the policy direction for the regulation of capital markets in Ontario”. It requires the OSC to ensure that “as an agency of the Government, the Commission conducts itself according to the management principles and policy priorities of the Government.” It states that the Chair, CEO and commissioners are appointed by and accountable to the Minister. It notes that the Minister has the power to recommend to cabinet any increase or decrease in the OSC’s powers. It states that the government has the authority to approve or reject OSC by-laws, rules, annual reports, and business plans. It further states that one of the Minister’s responsibilities is to inform the Chair “of the Government’s priorities and policy directions for the Commission.”

I could go on, but the message is clear. Sure, in performing their regulatory and adjudicative functions the regulators are to operate independently of government. But so far as the mandate, powers, responsibilities, and overarching policy goals of the OSC are concerned, the government is securely strapped into the driver’s seat. This emphasizes that when the government appoints the Chair of the Board, it is perfectly entitled to select a person who it believes shares its regulatory philosophy and policy goals. The MOU thus supports my argument, not Ed’s.

Ed also makes much of the Auditor General of Ontario’s criticism of governmental interference in OSC policy-making to buttress his case that Ms. Zordel’s appointment was illegitimately partisan. But the AG’s message is precisely the same, and indeed, entirely derivative of that found in the 2019 MOU. The AG states that regulatory and adjudicative decisions “must be made and be seen by the public to be made in an independent and impartial manner”. But then she goes on to acknowledge that the government has legislative authority to set the regulator’s policy direction. That legislative authority, as I have noted, includes the right to appoint all of the members of the Board of Directors (including the Chair) as well as the Commissioners.

Ed asserts that the government did not, as required by the MOU, consult with the OSC before appointing Ms. Zordel. However, the MOU states that the Minister is responsible for consulting with the “Chair and CEO” (at the time, the same person) “on candidates for appointment or reappointment to the Commission.” But the appointment of the Chair is not a Commission appointment. It is a Board appointment, and the Board has supervisory jurisdiction over the Commission.  While it might seem natural to suggest that the MOU implicitly requires government consultation with the CEO when appointing the Chair (if not other members of the Board), it is well to remember that the position of Chair is very different from that of CEO. The Board, which sits on top of the Commission, is a way-station between the government and the Commission. It is of an inherently more political nature, since it is a principal organ by which the government can put its policy spin on the regulator.  Thus, whether consultation should be required for these appointments is hardly an open and shut case.

There is common ground of a sort between me and Ed. The title of his piece states that “the OSC appointment is much ado about something,” a sentiment with which I wholeheartedly agree. I’m afraid in determining what that something entails, however, Ed is peering at the matter from the wrong end of the kaleidoscope.