The Ontario Securities Commission (OSC) published the final version of its statement of priorities for fiscal 2019 today, which sets out its policy objectives for the commission’s current year (ending March 31, 2019). The publication comes on the heels of the Canadian Securities Administrators’ (CSA) major policy decisions on “best interest” standards and embedded commissions, which were announced last month.
In today’s publication, the OSC is reinforcing its commitment to the CSA’s proposed reforms and bolstering the efficacy of the Ombudsman for Banking Services and Investments (OBSI). The regulator says that it, “remains strongly committed to investor protection and is continuing to expand its efforts to strengthen investor protection through various investor-focused initiatives.”
In particular, it points to the CSA reforms announced last month concerning client/advisor relationships (a.k.a client-focused reforms). Those reforms would require advisors to prioritize clients’ best interests, eliminate both deferred sales charges (DSCs) and trailer fees for discount brokers, but would not ban embedded commission structures across the board.
“The OSC, working with the CSA and the self-regulatory organizations, has developed a harmonized approach to address the key specific concerns we had identified in these areas, and ensures the interests of the client will be paramount in the client-registrant relationship,” the OSC states. It adds that it (along with the CSA) will develop recommendations to reform the requirements regarding advisor titles, designations and proficiency.
On the question of the conflicts created by embedded compensation structures, the OSC says that it “remains committed to achieving a resolution to the use of embedded commissions and compensation arrangements that will better align the interests of registrants with those of investors, and provide greater clarity on the services provided to investors along with their associated costs.”
Additionally, the regulator reports that it will work with the rest of the CSA “in considering options for strengthening OBSI’s abilities to secure redress for investors, including considering developing recommendations for implementing binding authority.”
The statement adds that the OSC’s consultation on this year’s priorities also raised issues that may lead to future reforms. In particular, it says that there is support for the work of its Investor Office and its “seniors strategy.” There also is growing interest in climate change and other environmental, social and governance considerations for investors as well as strong support for efforts to reduce the regulatory burden, both by reviewing the efficacy of rules and ensuring harmonization both within the CSA and with other, international regulators.
The OSC has added a new priority concerning gender diversity on corporate boards and management teams as well as plans to finalize a protocol for managing significant cyber disruptions.
“Our 2018-2019 statement of priorities strikes a good balance of protecting investors, keeping markets efficient and minimizing regulatory burden,” said Maureen Jensen, chair and CEO of the OSC, in a statement. “We’re continually working to achieve the right mix, and to provide clear rules and guidance for market participants.”
On the financial front, the OSC is forecasting that its revenue for fiscal 2019 will be 3.9% lower than actual revenues for fiscal 2018, and that expenses will be 15.9% higher, resulting in a projected operating deficit of $6.9 million for this year, which would reduce its $55.8 million surplus to $48.9 million by the end of March 2019.