On November 16th, the Ontario government introduced draft framework legislation to establish a new financial services and pensions regulator, the , as part of the omnibus bill (Bill 70) that followed the recent Fall Economic Statement. The hope is that the new regulator will bring more effective, coordinated and active regulation to both pensions and financial services in Ontario. Stakeholders, including pension plan administrators and sponsors, should pay close attention to how the new regulator takes shape.

What is FSRA?

As discussed in our previous post, the new agency, the Financial Services Regulatory Authority (FSRA), is intended to have broad regulatory authority across multiple financial sectors and to modernize the current regulators, the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO). The draft legislation provides that FSRA will have the authority to regulate sectors named in the Financial Services Commission of Ontario Act, 1997, including: pension plans, pooled registered pension plans, co-operative corporations, credit unions, insurance companies, loan and trust corporations, and mortgage brokers and agents.


FSRA is born from the Ontario Government’s review of FSCO, DICO and the Financial Services Tribunal (FST). In 2015, the Government appointed an expert Advisory Panel–comprising George Cook, James Daw, and Osler partner Lawrence Ritchie–to review and report upon the continued relevance of the mandates of these organizations. The Advisory Panel conducted broad consultations with stakeholders before delivering its Final Report. The Panel concluded in its report that, while the mandates of FSCO, DICO and FST continue to be relevant, the organizations need radical change to be more effective and responsive to the evolving financial environment. The Final Report recommended the creation of “a new, independent and integrated regulator”, namely, FSRA.

In addition, the Final Report recommends that FSRA be self-funded; properly governed by an expert board of directors; operationally independent from government; authorized to make and enforce rules; guided by a clearly articulated mandate; and obliged to act in a transparent and principled manner, manage risk and strive for a specified set of positive outcomes.

What does the draft legislation to establish FSRA achieve?

The draft legislation reflects some – but not all – of the recommendations contained in the Final Report. As recommended by the Panel, the draft legislation, if passed, would

  • establish FSRA as a corporation without share capital, operating independently from Government but with various points of accountability to the Legislature through the Minister of Finance;
  • provide that FSRA would be supervised by a board of directors appointed by the Lieutenant Governor in Council on the recommendation of the Minister of Finance; and
  • require the Board to appoint a Chief Executive Officer.

Notably, the Board is not required to appoint the three Superintendents (of Market Conduct, Prudential Matters and Pensions) as recommended in the Final Report, though it could appoint its employees as officers with such titles and functions. It is noteworthy that the draft legislation contemplates that the Superintendent of Financial Services will continue to exist; it remains to be seen how the role of the Superintendent and the role of the CEO of FSRA will integrate.

Under the draft legislation, the Board would have broad authority to make by-laws governing the administration, management and conduct of the affairs of FSRA, along with other matters, subject to the approval of the Minister of Finance. Given the framework nature of the legislation, the by-laws may be the vehicle for many of the structural and governance recommendations reflected in the Final Report.

The draft legislation also provides insight into how the finances of the new body will be structured. The Final Report recommended that FSRA be self-funded to allow it more independence and flexibility than FSCO, which currently both pays its revenues to the government and relies on government funding. The draft legislation facilitates this by providing a mechanism for FSRA to raise funds through assessments from the regulated sectors, with provisions allowing the Ontario Government to provide additional funds in case of funding deficiencies. FSRA’s revenues and investments would not form part of Ontario’s Consolidated Revenue Fund.

What remains to be seen?

While the draft legislation signals the direction for FSRA, it remains to be seen how FSRA will fulfil the intention to create a more effective, flexible and well-resourced regulator. For example, the framework legislation does not set a clear mandate for the new body. It provides only that FSRA’s objects are to regulate the named sectors. Nor does it provide it with rule-making power, as recommended in the Final Report. However, we expect that many such changes may be forthcoming through amendments to other legislation and regulations (e.g. the Pension Benefits Act (PBA) in respect of FSRA’s mandate to supervise pensions and related rule-making powers).

In addition, the Final Report recommends an independent FST. The draft legislation does not specifically address FST nor has the Government made clear elsewhere what it anticipates for this body. However, it is notable that the draft legislation does not provide for the FST to share information with FSRA during the transition, unlike FSCO, DICO and the Superintendent of Financial Services, which are all required to share information with FSRA and the Ministry of Finance. This indicates that it is not currently contemplated that FSRA will be taking over any functions carried on by the FST. Furthermore, the absence of any reference to the FST in the draft legislation may signal an intention that the FST will be independent from FSRA, in keeping with the Panel’s recommendations.

Will the new regulator have more regulatory muscle?

Nothing in the draft legislation suggests that FSRA will have greater regulatory powers than the current regulators. It is, however, significant that Bill 70 also contained amendments to the PBA that would provide the Superintendent of Financial Services with the power to impose administrative penalties of up to $25,000. This is a material change from the current enforcement powers under the PBA, which permit for the imposition of fines under the PBA only upon conviction of an offence and are rarely used as a result. The new powers may be provided in response to the Final Report’s recommendations to provide more tools for effective regulatory enforcement.

What is next for FSRA?

Moving forward, FSRA will work with the Minister of Finance to prepare to carry out its regulatory function. Based on the Fall Economic Statement, we expect an implementation plan to be forthcoming and to provide much of the detail regarding the structure of and the transition to the new regulator. While the draft legislation itself does not have a specified in-force date (it comes into force on a date to be named by proclamation), the Ontario Government appears to be moving quickly to put the building blocks of FSRA in place.

What will FSRA mean for Ontario pension plans?

At this stage, it is too early to tell what FSRA will mean for Ontario pension plans. However, based on the recommendations in the Final Report and Bill 70, we anticipate a more active and coordinated regulator with expanded powers.

We will keep you posted as the new regulator takes shape.