Since its formation on January 1, 2023, the Canadian Investment Regulatory Organization (CIRO), Canada's only truly national capital markets regulator,1 operated as a self-regulatory organization (SRO) with authority exercised largely as a matter of contract, rather than a product of statute. Recent government action has expanded CIRO's enforcement powers through statutory amendments. On June 5, 2025, Bill 242 received Royal Assent, giving effect to amendments to the Commodity Futures Act3 and the Ontario Securities Act,4 which expanded CIRO's enforcement powers and increased maximum administrative penalties for regulatory contraventions and fines for quasi-criminal offences.
The changes [PDF] to CIRO's enforcement powers expand its authority to compel evidence during enforcement investigations and grant statutory immunity to current or former directors, officers, employees or agents of CIRO for good faith conduct in carrying out CIRO's public interest mandate. The amendments also support new rules around short selling to reduce failed trades and prevent market manipulation.
The broadened enforcement tools have been largely sought by CIRO (or its predecessor, the Investment Industry Regulatory Organization of Canada (IIROC)), and follow the recommendations set out in the Capital Markets Modernization Taskforce's (taskforce) final report [PDF] published in January 2021 (the final report).5 The final report set out recommendations to modernize and streamline the regulation of Ontario's capital markets.6 While the amendments aim to provide CIRO with more enforcement teeth, the new powers may ultimately change CIRO's relationship with its members from one based on contract, to one grounded in statute. These new statutory powers may trigger certain protections for respondents who are the subject of CIRO enforcement investigations, including protections against self-incrimination under the Ontario Evidence Act and the Canadian Charter of Rights and Freedoms.7
The amendments
Bill 24 expands CIRO's enforcement powers in four key areas:
- expands CIRO's authority to compel evidence in enforcement investigations
- grants statutory immunity for certain CIRO employees in carrying out their public interest mandate
- increases maximum administrative penalties and fines
- imposes new requirements under Ontario's short selling rules
In this article, we discuss each of these amendments.
Enhanced powers to compel evidence during enforcement investigations
Recent amendments to the Commodity Futures Act and Ontario Securities Act empower the Chief Executive Officer of CIRO to appoint employees with legal authority to conduct investigations. These amendments also permit CIRO to compel evidence during enforcement investigations. This amendment aligns with the taskforce's recommendation to modernize powers and investigative tools to better facilitate quasi-criminal investigations.
Statutory immunity
Bill 24 also implements amendments to the Commodity Futures Act and Ontario Securities Act that grant immunity to current or former directors, officers, employees or agents of CIRO for actions taken in good faith during enforcement investigations.
Increase in maximum administrative penalties and fines
Importantly, these amendments introduce substantial increases to the financial consequences of contravening Ontario securities law under the Commodity Futures Act and Ontario Securities Act by increasing the maximum administrative penalty for non-compliance securities legislation and commodity futures law from $1 million to $5 million, and the maximum fine that may be imposed for a quasi-criminal offence under commodity futures law and Ontario securities law from $5 million to $10 million.
These amendments respond directly to the taskforce's recommendation as set out in its final report. The taskforce recommended that raising the maximum administrative penalty to $5 million reflects inflation given that the last increase in administrative penalty amounts occurred in 2003, and corresponds with the scale of Ontario businesses.8 The taskforce stated that its recommendation to increase the maximum fine for quasi-criminal offences to $10 million aligns with international standards, including the United States, which allows for criminal penalties of up to US$25 million; Australia, where the maximum criminal monetary penalty is AU$11.1 million; and the United Kingdom, where there is no monetary limit.9
New requirements for short selling
The amendments also expressly support the Ontario Securities Commission (OSC) and CIRO's efforts to improve market integrity by imposing requirements for short selling. Specifically, the Government of Ontario has acknowledged that CIRO's mandatory close-out requirements (which impose a specific timeframe for short positions to be closed10) would help mitigate potential share price manipulation. The OSC is also developing rules to prohibit short selling connected to prospectus offerings and private placements.11
These amendments follow the taskforce's recommendation to modernize Ontario's short selling regulatory regime.12 In the final report, the taskforce indicated that Ontario's short selling regime falls short in comparison to other jurisdictions such as the U.S., where mandatory close-out provisions are in place.
Implications
The amendments signal a shift in Ontario's approach to securities enforcement, with significant implications for registrants and investors whom they serve. The increase in monetary penalties raises the stakes for those found in breach of Ontario securities and commodity futures law, and along with the amendments enhancing CIRO's investigative powers, markedly expands CIRO's enforcement toolkit.
In light of the statutory powers to compel evidence, the amendments may afford respondents with certain protections against self-incrimination under the Ontario Evidence Act13 and the Charter.14 There is no doubt that respondents will advance arguments that such protections apply to them.
Further, CIRO's new powers of compulsion align with similar powers that OSC enforcement staff have held since 1994.15 Significantly, however, the OSC's powers of compulsion contain a corresponding obligation to maintain all compelled evidence in the "highest degree of confidence" pursuant to sections 16 and 17 of the Ontario Securities Act. The Capital Markets Tribunal has held that one of the main purposes of sections 16 and 17 of the Ontario Securities Act is to provide compelled witnesses with the comfort that the information they give will remain confidential.16 Nonetheless, CIRO's new powers of compulsion are not accompanied by corresponding confidentiality provisions. Accordingly, it remains to be seen whether and how these new powers will be invoked in a manner that maintains appropriate protections for witnesses providing compelled testimony, and how it will impact CIRO's ability to share compelled investigation materials with statutory regulators and law enforcement agencies.
We will continue to monitor and report on developments.
Footnotes
1. On January 1, 2023, CIRO formed through the merger of the Investment Industry Regulatory Organization of Canada (IIROC) and Mutual Fund Dealers Association (MFDA).
2. Bill 24, An Act to implement Budget measures and to enact and amend various statutes [PDF], online.
3. R.S.O. 1990, c. C.20.
4. R.S.O. 1990, c. S.5.
5. Capital Markets Modernization Taskforce, Final Report [PDF] (the final report), January 2021, online.
6. The taskforce identified key challenges and made over 70 recommendations with the stated purpose of amplifying growth and competitiveness in Ontario's capital markets.
7. See, e.g., Castonguay, Re, 2012 IIROC 42, at para. 14, where CIRO's predecessor, IIROC, observed: "[T]he Charter, according to its s. 32, applies to the Parliament of Canada and the provincial legislatures. It also applies to bodies created by federal or provincial statute, even those independent of government, when exercising a statutory authority."
8. Final report, p. 91.
9. Final report, p. 92.
10. Canadian Investment Regulatory Organization, "CIRO Proposes Amendments Respecting Mandatory Close-Out Requirements" (January 9, 2025), online.
11. Ibid.
12. Final report, p. 52.
13. R.S.O. 1990, c. E.23, s. 9.
14. The Constitution Act, 1982, Schedule B to the Canada Act 1982 (UK), 1982, c. 11, s. 13.
15. R.S.O. 1990, c. S.5, ss. 11, 13, 16, 17. See also TeknoScan Systems Inc. et al. (Re), 2024 ONCMT 32 [PDF], where the Capital Markets Tribunal recently held that protections under s. 9 of the Evidence Act render read-ins from transcripts of compelled examinations to be inadmissible at hearings where a respondent elects not to testify.
16. Sharpe (Re), 2022 ONSEC 3 [PDF], at para. 56.
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