The Ontario Securities Commission (OSC) has published its annual draft statement of priorities, setting out specific initiatives that it will pursue in its upcoming fiscal year. There are many items of interest to the investment management community, briefly described below. Comments are being accepted on the draft until May 9, 2016.
Repeating comments from last year’s statement of priorities, the draft suggests that a well-functioning investor/advisor relationship is critical to the economic wellbeing of Ontarians and to healthy capital markets. With that in mind, one OSC priority is to publish and conduct consultations on provisions to create a best interest standard, as well as consultations on reforms (or guidance) under National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) to help improve the client/advisor relationship. The OSC also intends to finalize its analysis of advisor compensation practices. Interestingly, the draft statement of priorities indicates OSC Staff will identify those practices that appear inconsistent with current regulatory expectations. It is currently unknown whether identifying such practices will lead to reforms banning them.
The OSC also telegraphed its intention to closely monitor the newly introduced changes to the exempt market regulatory regime to monitor market conduct. In addition, Staff will continue their targeted compliance reviews of high risk and new registrants, including online advice and portal business models. Registrants should expect a targeted review to include questions relating to their level of cyber security resilience, including measures for protection of personal investor data.
With respect to its enforcement efforts, mention is specifically made to implementing the proposed OSC Whistleblower Program, and beginning to use input from participants to pursue potential cases (see our October 2015 bulletin for more information on the proposed whistleblower policy).
We can also expect to see continued advancement on rules relating to the transparency of the fixed income market. Initiatives in this respect include the implementation of public transparency of fixed income trading data, specifically for corporate debt, with IIROC acting as the information processor. Rules with respect to over-the-counter derivatives continue to be a priority, including the introduction of a registrant regulation framework for derivatives market participants.
Similar to 2014, the OSC will be sending out a 2016 Risk Assessment Questionnaire (RAQ), with questions including the use of the new prospectus exemptions by registrants.