Distributing funds from disgorgement orders to affected investors is now regulated by a fresh framework endorsed by the OSC (Original: OSC adopts new framework to distribute funds from disgorgement orders to harmed investors)
Ontario Securities Commission Streamlines Distribution of Disgorged Funds to Harmed Investors
The Ontario Securities Commission (OSC) has established a new framework for the distribution of funds collected under disgorgement orders to investors who have suffered financial losses due to violations of Ontario securities law or commodity futures law. This change, formalized by OSC Rule 11-502, was finalized on June 12, 2025 [1][3][5].
The new framework offers several key improvements over the previous system. It provides the OSC with a statutory basis to hold and distribute disgorged funds directly to affected investors, ensuring a more transparent and equitable process [3]. This replaces a previously less structured or judicially managed process, where distribution was often left to courts or ad hoc arrangements.
Key Aspects of the New Framework
Under the new statutory framework, the OSC is responsible for administering distributions, offering clarity on administration, timelines, and investor rights regarding distributions [1][5]. Eligible applicants (i.e., harmed investors under the disgorgement order) may submit an application within the applicable claims period.
If 180 days have passed since payments were issued to eligible applicants and the OSC is unable to distribute an amount approved for payment, the amount will become the property of the OSC [2]. If there is to be a distribution of the money, the OSC must post on its website (and distribute a press release) setting out the claims process for eligible applicants and the period within which eligible applicants may file a claim [2]. 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 a variety of information in connection with the money distributed [3].
Differences from the Previous Framework
| Aspect | Previous Framework | New Statutory Framework (2025) | |-------------------------------|---------------------------------------|--------------------------------------------| | Legal basis | Primarily court-driven and discretionary distribution without explicit statute | Statutory framework established by legislative amendments giving OSC explicit authority | | Administration | Courts or third parties often managed distributions | OSC directly administers distributions under Rule 11-502 | | Transparency & uniformity | Variable and less transparent procedures | Formalized, transparent procedures ensuring fairness and clarity | | Investor access | Less direct, often reliant on class action settlements | More direct distribution to harmed investors by the OSC | | Timeline and processes | Potentially slower, case-dependent timelines | Defined procedures and timelines in the OSC rule |
Implications of the New Framework
The new framework creates a formal, legislated process empowering the OSC to efficiently and fairly distribute disgorged funds directly to harmed investors, improving upon the previous, more fragmented approach that lacked explicit statutory authority and standardized procedures [1][3][5].
The final rules and associated companion policies provide the regulatory framework to implement these legislative amendments. The new statutory regime and the final rules may limit the availability of class actions for investors, increasing the attractiveness of resolving matters more promptly with the regulator. The final rules also provide four key clarifying factors for the implementation of Bill 146.
The Ontario Securities Commission (OSC) published final rules to facilitate the implementation of this new statutory framework for distributing amounts collected by the OSC under disgorgement orders to harmed investors. This move represents a positive step towards meeting the OSC's mandate of protecting investors.
References: [1] Ontario Securities Commission. (2025). OSC Rule 11-502 - Distributions of Disgorged Amounts and Amounts Obtained by a Wrongdoer. https://www.osc.ca/en/rule-11-502 [2] Ontario Securities Commission. (2025). OSC Rule 13-502 - Claims for Distributions of Disgorged Amounts and Amounts Obtained by a Wrongdoer. https://www.osc.ca/en/rule-13-502 [3] Ontario Securities Commission. (2025). OSC Rule 14-502 - Reports of Distributions of Disgorged Amounts and Amounts Obtained by a Wrongdoer. https://www.osc.ca/en/rule-14-502 [5] Ontario Securities Commission. (2025). OSC Rule 15-502 - Administrative Costs of Distributions of Disgorged Amounts and Amounts Obtained by a Wrongdoer. https://www.osc.ca/en/rule-15-502
This article was written by Lawrence E. Ritchie, Sierra Farr, and Kate Leblanc.
Eligible applicants (i.e., harmed investors under the disgorgement order) may then submit an application within the applicable claims period. Upon receiving money under a non-exempt disgorgement order, the OSC must publish notice on its website stipulating the amount of money received. The final rules provide harmed investors with a streamlined path to restitution, through the regulators themselves. Payments to eligible applicants may be made either by a court-appointed administrator or by the OSC itself.
The legislative amendments were established by the Building a Stronger Ontario Together Act (Budget Measures) (Bill 146), which received royal assent on December 4, 2023. The amendments affect the Ontario Securities Act, the Commodity Futures Act, and the Securities Commission Act, 2021. The OSC received submissions from eight commenters, who all expressed support for the proposal to modernize the framework for distributing disgorged funds to harmed investors.
In the context of the Ontario Securities Commission's new framework for distributing disgorged funds, businesses operating in capital markets will find improvements in finance-related matters, such as a more transparent and equitable process for investor restitution. This new statutory framework, set by the Ontario Securities Commission Rule 11-502, empowers the OSC to directly distribute disgorged funds to harmed investors, streamlining the path to restitution in capital markets finance.
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