Securities Settlements as Examples of Crisis-Driven Regulation

International bodies have criticized Canadian financial markets for being lax in the area of enforcement. We examine whether such criticisms are applicable to settlements struck by the Ontario Securities Commission (OSC). We make a number of important findings. First, the total number of parties sanctioned and the total amount of payments made to the OSC increased after the 2008 financial crisis, although these numbers have decreased in recent years. Second, there is no discernible trend in the types of proceedings by which cases were concluded, although the OSC does use settlements more than other provincial regulators. Third, corporations, first time offenders, and financial service companies are more likely to settle than individuals or repeat offenders and the OSC tends to settle less often when the case involves serious offences such as fraud or manipulation. Finally, regardless of specification, penalties imposed as a result of a settlement were not statistically different than those imposed in a hearing. Interestingly, while there are outliers, financial service companies did not pay higher penalties than other parties, nor did repeat offenders. On the basis of this data, we raise questions about whether settlements are examples of crisis-driven or “procyclical” regulation. Our data support the idea that regulatory activity follows a cyclical pattern and, following a crisis, regulatory activity increases