On October 17, 2022, the Ontario Securities Commission (OSC) published its 2021-2022 Annual Report – Responding to Change; Preparing for the Future (the Report), along with its financial statements for the year ended March 31, 2022, and the accompanying MD&A. The Report highlights another busy year for the OSC.
The OSC processed 43,815 individual registration applications, an increase of 14% from last year. As well, it approved a record number of exemptive relief requests including 265 requests from investment and registrant firms. In the context of protecting investors and market integrity, the OSC noted that it discontinued deferred sales charges for mutual funds, published new rules expanding investor protection for seniors, and brought the Client Focused Reforms for the investment industry into force.
With respect to responding to emerging trends, the OSC approved 83 ESG funds representing 24% of all new funds created in the year. As well, it registered four new crypto asset trading platforms to operate in Ontario with another 20 applications under review.
The OSC also noted that it prepared for the implementation of a new governance structure, establishing an independent Capital Markets Tribunal and separating the Chair and CEO roles. In the Message from the Chair and CEO, Grant Vingoe wrote that the OSC is co-leading the Canadian Securities Administrators' (CSA) work to create a new self-regulatory organization that combines the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), which is expected to launch by year-end.
The Report also includes an update on the OSC's Statement of Priorities. The Statement of Priorities sets out the OSC's strategic goals, priorities and specific initiatives for the year. The OSC noted that its 2021-2022 goals are to: (i) promote confidence in Ontario's capital markets; (ii) reduce regulatory burden; (iii) facilitate financial innovation; and (iv) strengthen its organizational foundation. For each goal, the OSC outlined a number of priorities, summarizing why they are important, and their success measures.
For the first goal of promoting confidence in Ontario's capital markets, the OSC's first priority was to support the implementation of the Client Focused Reforms. The Report stated that the Client Focused Reforms establish a higher level of protection for investors and a higher standard of care for the investment industry. Success measures include: (i) investors benefiting from registrants addressing material conflicts of interest in the best interests of investors; (ii) registrants having considered specific factors when deciding whether an investment product is suitable and whether recommendation put the client's interest first; and (iii) investors receiving greater clarity about the products and services they can expect from their registrants.
Other priorities under this first goal of promoting confidence in Ontario's capital markets included: (i) implementing mutual fund embedded commissions rules and the discontinuance of the mutual fund deferred sales charge payment option; (ii) improving the retail investor experience and protection; (iii) strengthening investor redress through the Ombudsmen for Banking Services and Investments through policy and oversight activities (read more about that in our in brief article below); (iv) bringing timely and impactful enforcement actions; (v) publishing a position paper regarding the framework for self-regulatory organizations; (vi) continuing to expand systemic risk oversight; (vii) strengthening oversight of crypto asset trading platforms and other dealers; (viii) advancing work on the Capital Markets Modernization Taskforce policy recommendations identified in the Ontario Government's 2021 Budget; (ix) improving climate-related financial disclosures; (x) integrating new mandates and fostering capital formation and competition; (xi) amending registration information requirements; (xii) developing total cost reporting disclosure for investors; (xiii) developing fee rule amendments; and (xiv) harmonizing the interpretation of primary business financial statement requirements in IPOs.
With respect to the second goal of reducing regulatory burden, the OSC reported that it is continuing to develop a continuous improvement framework with a systematic focus on reducing undue regulatory burden. With respect to the proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations and Other Amendments and Changes Relating to Annual and Interim Filings of Non-Investment Fund Reporting Issuers, the OSC stated that it plans to publish final amendments in early 2023.
In connection with the goal of facilitating financial innovation, the OSC reports that its Innovation Office launched OSC TestLab in November 2021, a dedicated environment to test innovative solutions and new approaches to regulation aimed at reducing burden, promoting economic growth, and fostering capital formation in Ontario's capital markets. Applications for the first TestLab cohort were accepted from November 2021 to January 2022, with the successful applicants announced in April 2022.
With respect to the fourth goal of strengthening the OSC's organizational foundation, the OSC reported that the development of SEDAR+ is an ongoing and important CSA project and remains a top priority for the OSC. The OSC continues to actively participate with the CSA in the development of SEDAR+. Phase one of SEDAR+ is focused on issuer filings and will replace the cease trade order database, the disciplined list, SEDAR, and local exempt distribution reporting systems.
The OSC also reported on its 2021-2022 service standard results. Of note is that with respect to Advising Representative, Associate Advising Representative, and CCO applications, the goal of providing decisions on routine applications within 20 working days of receiving complete and adequate applications in acceptable form was met 71% of the time in Q1, 65% in Q2, 68% in Q3 and 86% in Q4. The OSC's target is to meet the service standard 80% of the time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
