In October 2011, the Ontario Securities Commission (“OSC“) raised the concept of offering no-contest settlements of the sort commonly employed by the US Securities and Exchange Commission (“SEC“). On March 11th of this year, after receiving some sharply divided feedback in months of public hearings, the OSC announced that it was moving forward with the introduction of a policy that would permit settlement of enforcement proceedings without requiring an admission by the respondent of misconduct (no-contest settlements). As the controversial policy is rolled out, class action practitioners and commentators watch with interest to see what impact the OSC’s altered approach will have on securities class actions in Ontario, a jurisdiction that has become known as a haven for wronged investors due to plaintiff-friendly securities legislation.

Until the introduction of the changes, the OSC’s approach to the settlement of charges against persons accused of breaching securities laws was to require an admission of guilt or culpability. This created a significant stumbling block in settlement discussions for those willing to take responsibility for breaches, but were concerned about their exposure in further or pending class action suits that could arise from an admission of guilt.

The new approach is among four new enforcement initiatives to be adopted by the commission aimed at encouraging co-operation from alleged wrongdoers to accelerate dispute resolution more efficiently. The OSC has emphasized that a no-contest settlement will typically be available where a “responsible” regulated market participant has come forward and co-operated with the OSC after discovering a violation of securities law and has agreed to pay some sort of compensation to investors for losses.

The introduction of the program is controversial as some feel that no-contest settlements will allow wrongdoers to avoid the consequences that would otherwise flow from an admission of guilt. In essence, it is argued, wrongdoers will be able to simply pay a premium in order to avoid the litigation risk and public backlash that would typically result from a guilty admission. As OSC enforcement proceedings do not result in direct compensation, victims of fraud and wronged investors often rely on admissions of guilt secured by the OSC to achieve restitution through class action litigation. If no-contest deals remove any admission of misconduct, aggrieved investors fear there will be little left for them to rely on in pursuing further remedies in civil courts.

For advocates of those facing regulatory charges, there is at the same time a concern that such programs are susceptible to becoming mechanisms for effectively coercing respondents who don’t want to make admissions of guilt to pay greater settlement amounts.

To assuage the concerns of the program’s detractors, the OSC has pledged to narrow the eligibility of such no-contest settlements by screening them through a hearing panel. No-contest settlements will not be available:

• to anyone who has “engaged in abusive, fraudulent or criminal conduct”;
• to anyone who has failed to address any losses caused to investors, or who has obstructed or misled investigators;
• to repeat offenders; or
• for cases handled by serious offenses unit not eligible.

Proponents of no-contest settlements, including the OSC and lawyers who act for class action defendants that are also facing allegations before the Commission, maintain that allowing no-contest deals will resolve enforcement matters more efficiently, streamline the OSC’s case log and free up time and resources for the OSC to focus on more serious infractions such as pursuing fraudsters, cracking down on insider trading and laying more criminal charges.


David Gadsden represents global clients in complex commercial disputes. He is the Chair of Baker McKenzie's Canadian Class Actions Group and is known for his sound advice on commercial class actions, competition and antitrust matters, arbitration, fraud cases and product liability matters. Clients value David's pragmatic and determined approach to disputes and have described him as "absolutely terrific at bringing across the finish line the most complex and multidimensional issues". David has been recognized by Benchmark Litigation, Legal 500, Best Lawyers Canada, and Lexpert’s annual Guide to the Leading US/Canada Cross-border Litigation Lawyers. He has previously been recognized by Lexpert as a Rising Star. As Chair of Baker McKenzie's Canadian Class Actions Group, David draws on his extensive class action experience, having acted as counsel for defendants and plaintiffs in numerous national and global class action lawsuits involving allegations of anti-competitive conduct, professional service negligence, product liability and securities fraud. David's practice also comprises international and domestic business disputes of all manner, including competition and antitrust litigation, commercial arbitration, business tort and trade secrets claims and product liability matters. David also has deep experience in fraud and financial crime matters. He is trusted counsel on multijurisdictional fraud investigations, including related civil disputes and regulatory proceedings. David has appeared as counsel at all levels of court in Ontario and in international and domestic arbitrations. He has completed the Osgoode Intensive Trial Advocacy Program, as well as the Intensive Advocacy Training Program conducted by the National Institute of Trial Advocacy. David has also lectured in the Osgoode Hall Graduate (LL.M.) Programme.