* OSC chair can't spell out tests for "public interest"
* OSC to consider Borse Dubai's 11 pct stake after deal
* OSC will exercise "independent judgment"
* OSC will consider committee's report, public comments
(Adds details, background, quotes)
TORONTO, Feb 23 The Ontario Securities Commission will assess whether the London Stock Exchange's (LSE.L) proposed takeover of TMX Group (X.TO) is in "the public interest," a concept that even the head of OSC finds nebulous.
OSC Chair Howard Wetston on Wednesday said he could not say what specific metrics the OSC would use to assess the merits of the deal, which would combine the operators of the Toronto and London stock exchanges into a $7 billion transatlantic power.
"I can't define 'public interest' but I sure know it when I see it," Wetston said in a speech in Toronto.
Under provincial law, the public interest includes protecting investors from fraud, unfair practices and promoting integrity and confidence in the capital markets.
The proposed deal - one of three major exchange mergers under review globally - has met with growing opposition in Ontario, home province of the Toronto Stock Exchange. Ontario Finance Minister Dwight Duncan and opposition parties in the legislature are questioning how the transaction would affect the province and the country. [ID:nN22281822] [ID:nN22294628]
Duncan has set up an all-party legislative committee to conduct its own review [ID:nN22281822] and issue a report by April 7. Wetston said any OSC decision would likely come after that.
The OSC is still waiting for the application for review from TMX to start the process.
PROMOTING INTEGRITY AND CONFIDENCE
Wetston, who took the helm in October, said the OSC would take into consideration comments from the legislative committee and the public, while exercising independent judgment when making a final ruling.
As it stands, the LSE takeover would leave a single shareholder - Borse Dubai Ltd [BRSDB.UL] - with more than 10 percent ownership in the combined company, exceeding limits set out by the OSC. [ID:nLDE71E020]
"This share restriction will be considered in the OSC's review of the transaction," Wetston said.
As vice-chair, Wetston was responsible for raising TMX ownership limits to 10 percent from 5 percent.
Borse Dubai, the operator of the Dubai stock exchange, may consider selling a part of its 20 percent stake in the LSE to facilitate the deal, a newspaper reported last week.[ID:nLDE71E015] A sourcelater told Reuters the company had not been asked to reduce its holdings.
Oversight by Ontario is not the only hurdle the deal faces. The federal government and at least three other provinces -- Quebec, Alberta and British Columbia -- will have a say. The fragmented regime means a decision on the transaction may not come until the end of the year.
Wetston expected some overlap between the OSC and the province, but said its focus will strictly regulatory.
"If they are addressing the regulatory requirements, then we'll consider them at that time. That's what the public interest requires."
(Editing by Frank McGurty)
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