A. Priorities for the Coming Year
On June 25, the Ontario Securities Commission (OSC) published its annual Statement of Priorities (SOP). As we mentioned in our April bulletin, COVID-19 and the related market uncertainty caused the OSC to forego its usual substantive consultation on priorities. Instead, the OSC used last year’s SOP, its plans flowing from its burden reduction initiative and its routine engagements with stakeholders to develop its 2020-21 priorities. Consequently, there are very few surprises in this year’s final SOP. We’ve summarized below key initiatives that we believe will be of interest to our readers.
Client-focused Reforms: The OSC will work with other members of the Canadian Securities Administrators (CSA) and the self-regulatory organizations (SROs) to help registrants operationalize the amendments.
Seniors Strategy: The OSC will continue to implement its Seniors Strategy, including continuing with its consultation on proposed changes to the regulatory framework to address financial exploitation and cognitive decline among older and vulnerable investors. (See our March 2020 article on this consultation.)
Leverage in the Asset Management Industry: Working with other members of the International Organization of Securities Commissions (IOSCO), the OSC plans to design and implement enhanced data collection to monitor vulnerabilities associated with the asset management industry’s use of leverage.
OTC Derivatives: The OSC plans to:
- Publish (with Ministry pre-approval) amendments to the business conduct rule for over-the-counter (OTC) derivatives, limiting the rule’s scope and outlining jurisdictions that will be granted equivalency;
- Work with the CSA on the next version of the proposed OTC derivatives dealer registration rule;
- Conduct compliance reviews of the OTC derivatives rules on trade reporting, clearing, segregation and portability; and
- Develop and implement a framework to analyze OTC derivatives data for systemic risk and market conduct purposes.
Continue Policy Work on Embedded Commissions: The OSC will continue working within the CSA and on its own regarding rule reforms affecting mutual fund deferred sales charges (DSCs) and order execution-only embedded commissions.
Retrospective Reviews of Rulemaking: As part of its efforts to enhance its economically-focused rulemaking, the OSC plans to conduct restrospective reviews of past regulatory changes to see if the intended objectives were achieved.
Re-Consider the SRO Framework: As discussed elsewhere in this bulletin, the CSA has launched a consultation on the SRO framework. The OSC also plans to work on clarifying and streamlining the SROs’ recognition orders and memoranda of understanding.
Office of Economic Growth and Innovation (OEGI): The OSC plans to have the OEGI fully operational and delivering on its mandate by fiscal year-end 2021. This includes having the OEGI conduct outreach with market participants to identify further, potential burden reduction opportunities.
CSA National Systems: The OSC will support the CSA in its implementation of revised national systems (i.e. SEDAR, SEDI and NRD) under the name SEDAR+. It also will work with CSA members to amend the operational and fee rules governing CSA systems.
Modernize the OSC’s Technology Platform: The OSC will continue redeveloping its website, implementing its information security program, and adding more tools and technology to enable to staff to work more effectively and efficiently from home.
B. 2019-2020 Report Card
The OSC also published its 2019-2020 OSC Statement of Priorities Report Card (Report Card). Chief Compliance Officers (CCOs) may find it useful to skim the Report Card because it consolidates into a single document status reports on the OSC’s regulatory and operational initiatives from the past fiscal year. It also highlights some “in progress” initiatives that the OSC expects to deliver in the coming year. Notably, the Report Card indicates that the OSC expects proposed reforms to the regulatory framework governing registrants’ other business activities (OBAs) to be published for comment in the fall of 2020.
C. Be Prepared for the OSC to Shift Its Stated Priorities
Market participants should always be prepared for the OSC to adjust its priorities in light of significant emerging issues. This year more than ever, however, market participants should be prepared for surprises. The OSC has also indicated that it expects to adjust and re-align its priorities throughout the coming year to accommodate changes resulting from the impact of COVID-19 as well as the outcomes of the Ontario Government’s Capital Markets Modernization Task Force.
Please contact us if you would like to discuss how the OSC’s priorities and goals for the coming year might affect your business.
June 30, 2020