On June 29, 2021 the Ontario Securities Commission (OSC) published its 2021-2022 Statement of Priorities (the Statement of Priorities) for the financial year ending March 31, 2022. The OSC received 16 comment letters on its draft Statement of Priorities which was released for comment in November 2020. The OSC added new priorities to reflect its role in developing and implementing policies for the 2021 Government of Ontario budget. The final list outlines 20 priority areas on which the OSC will focus its resources.
The Statement of Priorities sets out four strategic goals, as follows: 1) promote confidence in Ontario’s capital markets; 2) reduce regulatory burden; 3) facilitate financial innovation; and 4) strengthen the OSC’s organizational foundation. The OSC also acknowledged the effects of several current events and trends such as the COVID-19 pandemic, the Ontario Capital Markets Modernization Taskforce (the Taskforce) and March 24, 2021 Ontario provincial budget, the increasing pace of financial innovation, the growing role of retail investing, and the surge of capital-raising.
Promoting Confidence in Ontario’s Capital Markets
With respect to the goal of promoting confidence in Ontario’s capital markets, the OSC’s first priority is to support the implementation of the Client Focused Reforms (the CFRs). The CFR amendments relating to conflicts of interest took effect on June 30, 2021 and the remaining changes will take effect on December 31, 2021. The OSC noted that it is working with the other Canadian Securities Administrators (CSA) jurisdictions to implement the CFRs and provide guidance, respond to questions and otherwise assistant registrants to operationalize the CFRs. The OSC is also publishing frequently asked questions and guidance to assist with implementation.
The OSC’s second priority under this goal is the implementation of mutual fund embedded commissions rules and the discontinuance of the deferred sales charges (DSC) payment option. The OSC will also work with fund mangers and dealers to streamline implementation issues relating to the trailing commission ban where no suitability determination is required.
The third priority is to improve the retail investor experience and protection. This will be achieved by engaging in stakeholder consultations on ways to improve the investor experience, investor education and financial literacy activities, and continued implementation of the OSC Seniors Strategy.
There are several other priorities under this goal, including strengthening investor redress through the Ombudsman for Banking Services and Investments (OBSI), bringing timely and impactful enforcement actions, advancing work on the Taskforce policy recommendations identified in the Ontario Government’s 2021 Budget, improving climate change-related disclosures, and integrating new mandates for fostering capital formation and competition in the OSC’s activities.
The OSC noted that its work will include implementing annual surveys of private and public investment funds about their portfolio exposure to assess systemic risks with a focus on aggregated asset class and leverage information.
Reducing Regulatory Burden
The OSC will continue to implement its burden reduction initiatives under the oversight of its Innovation Office. This will involve the adoption of certain Taskforce recommendations and the continued implementation of the burden reduction initiatives identified in the OSC’s November 2019 report “Reducing Regulatory Burden in Ontario’s Capital Markets”. The specific actions will include working with the CSA on the Rationalization of Investment Fund Disclosure (RID) project and streamlining continuous disclosure requirements.
The third goal of the OSC is to facilitate financial innovation. This will be done by the OSC continuing to develop flexible regulatory approaches and improved access to services and support for businesses looking to establish or expand in Ontario. The OSC will implement a multi-year plan for its Innovation Office, and engage with innovative businesses. One of the actions under this priority will be for the OSC to work with external stakeholders, such as law firms, advisors, incubators and accelerators, and venture capital and angel investor organizations to consider potential tools to give the innovation community important insights and information into securities law requirements.
Strengthening the OSC’s Organizational Foundation
The last goal of the OSC is to strengthen its organizational foundation in order to regulate and support an ever-changing and highly competitive financial sector. The first priority under this goal is the redevelopment of the CSA national systems with SEDAR+. This new CSA system is intended to be the common platform for all filings, disclosure, payments, and information searching for the Canadian capital markets. Unfortunately, on June 25, the CSA announced that the timing for the roll-out for the SEDAR+ platform will be delayed.
Other priorities under this goal include modernizing the OSC’s technology platform and increasing the use of analytics in delivering regulatory outcomes, to be overseen by the OSC’s newly created Digital Solutions Branch. The OSC is also prioritizing fostering inclusion, equity, and diversity in the OSC community. This will include implementing an Inclusion and Diversity Strategy and taking actions outlined in the BlackNorth Initiative (BNI) CEO pledge to end anti-Black systemic racism.
The OSC will continue to monitor and adapt to the impacts of the COVID-19 pandemic to accommodate remote work including a hybrid workplace model post-pandemic. The OSC will also implement structural changes to reflect governance best practices and enhance tribunal independence. This will include defining new roles of key senior leaders like the CEO, Chair, Board of Directors, Chief Adjudicator and Adjudicators. The expected outcome of this will be a separation of the regulatory and adjudicative functions at the OSC and a new Capital Markets Tribunal that will enhance tribunal independence, while preserving accessibility and transparency.
The OSC has a very busy agenda for the upcoming year. That also means that it will likely be another busy year for market participants from a regulatory perspective. If you have any questions about the Statement of Priorities or how they might impact your firm, please contact your usual lawyer at AUM Law.
August 31, 2021