Adapting to new investment trends: Meet GRANT VINGOE, Chair and CEO, Ontario Securities Commission

By Leah Golob | The Registrar

Grant Vingoe

Over the last few years at the Ontario Securities Commission (OSC), Grant Vingoe, chair and CEO, has been keeping busy staying on top of the pace of change.

The OSC, which regulates Ontario’s capital markets, has been witnessing change so rapidly that it’s, in some ways, altered the nature of the job.

“There’s a tremendous influx of retail investors who are do-it-yourself investors, who aren’t using traditional advice as much and relying much more on social media and other sources of information,” he says.

“That’s a giant change. There was a point during the year where retail volume was almost greater than institutional volume in the stock markets. And you see the discount brokerages adding more and more clients to their roster.”

In fact, Canadians opened 2.3 million new self-directed accounts in 2020 compared to 846,000 in 2019, according to the research firm Investor Economics.

This changes things because investors aren’t relying on traditional investment advice or investment advisors who have oversight and proficiency requirements, Vingoe says.

“ There’s a tremendous influx of retail investors who are do-it yourself investors, who aren’t using traditional advice as much and relying much more on social media and other sources of information.”

And, while social media can be a source of valid information, there’s a lot of misinformation out there, he adds. Tweet-sized communications, instead of more nuanced analysis, can promote impulsive investing.

“And we’ve seen with the meme-stock phenomenon that there’s a crowding into particular companies based on a perception but very little sound investment fundamentals,” he says. That’s created a lot of volatility in stock, primarily in the United States, he adds, but it’s also relevant in Canada.

With Canada’s meme-stock phenomenon, a lot of Canadians invest in U.S. stocks through Canadian discount brokers that then trade through their counterparts in the United States.

“There are very high costs associated with this and social media knows no borders. That’s the primary source of information,” Vingoe says.

It’s impacted how the OSC thinks about investment activity.

In March of this year, the OSC issued a notice expressing the view that most crypto-asset trading platforms were subject to the OSC’s regulators and needed to be licensed as dealers and perhaps marketplaces.

“We have to think about how we regard the influencers on social media who are potentially spreading information, and maybe misinformation, and whether they have financial incentives for doing so.”

Vingoe explains that the OSC has always relied on traditional disclosure methods with investors—written documents that are delivered to them and investor education delivered in long-term presentation.

“We have to think about that differently. How do we participate in investor education? How do we design our rules to communicate to a new demographic that’s receiving their information through social media? And what does that mean for our whole disclosure regime as securities regulators?” he says. “That’s yet to be fully developed. That does change how we regulate and how we communicate and how issuers communicate with investors quite profoundly.”

One place the regulator has been experimenting with communicating is the platform Reddit, particularly in the subreddit Baystreetbets.

“We have to go where the investors are,” Vingoe says. “We’re kind of a sober voice on Reddit. We probably stand out because we’re not the hyped-up voices but the voice of caution.”

Increased attention on cryptocurrency has also been keeping Vingoe busy this past year.

“The crypto asset phenomenon makes me think sometimes we’re becoming the crypto asset regulatory agency of Canada,” he jokes. “It’s taking up such extensive resources. There’s a lot of promise in that technology and it definitely represents a trend.”

In March of this year, the OSC issued a notice expressing the view that most crypto-asset trading platforms were subject to the OSC’s regulators and needed to be licensed as dealers and perhaps marketplaces.

Even though Bitcoin and Ether can be viewed as their own currencies, in almost every case the investor doesn’t own the asset themselves — they own a contract that entitles them to receive it. So, in the OSC’s eyes, these crypto contracts are still like regular investments. However, in the case of crypto, many platforms are offering a kind of investment called a derivative where there’s a promise they’ll be delivered in the future.

“Once we realized that investors weren’t receiving the underlying assets and you have this bundle of rights, we insisted that [trading platform companies] come in, describe their operations, and initially become licensed as restricted dealers and go on the road that would take them to an IIROC [the Investment Industry Regulatory Organization of Canada] membership.”

To date, the OSC has registered six crypto asset trading platforms as restricted dealers subject to terms and conditions. They’ve also initiated enforcement actions against those who weren’t prepared to come forward. In response, some have said they’re leaving Ontario.

“Our enforcement actions continue, but we have provided a balanced, effective path for registration for those prepared to be transparent and open with us.”

Vingoe has now been with the OSC since 2015. He joined as vice-chair and commissioner before becoming CEO and chair in the spring of 2020. A graduate of Osgoode Hall Law School who received his LL.M from the New York University School of Law, he gained experience in the private sector as a lawyer focusing on regulation in the financial sector, corporate finance, and cross-border securities initiatives.

The OSC isn’t his first role outside of private industry, however. Vingoe was the independent director of the Investment Industry Regulatory Organization of Canada (IIROC) and was chair of its Corporate Governance Committee.

Representing public policy and interest was appealing because of the impact he could have on investors in Canada, and even globally, since the OSC participates in international organizations.

“After being a participant in the private sector for so long, to actually take that learning and give back so you can produce better outcomes for all stakeholders and investors, in particular, was a social good that compelled me to want to try my hand at regulation.”

Vingoe says his decades in the private sector have been an advantage, and recommends other regulators try a role outside of government to better inform their position.

“I do think it’s important that regulators spend part of their careers in the trenches, either in industry or as investor advocate or as an academic,” he says. “That’s really important in the development of their careers and also their personal satisfaction that they spend some part of their career in a different area that will help them ultimately become better regulators in the long run.