Businessman inspecting paperwork document digitally
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A group of provincial securities regulators is launching an initiative that will seek to test electronic know-your-client (KYC) solutions that could make it easier for firms to collect clients’ data digitally, and for investors to switch firms and open new accounts by sharing that data electronically.

On Tuesday, the group of regulators (including those in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick and Nova Scotia) announced the launch of their first project under a new Canadian Securities Administrators (CSA) initiative, known as CSA Collaboratory, which aims to explore the market and regulatory implications of novel technologies and business models.

The first project under this initiative will examine the implications of e-KYC and data portability, including the possible regulatory barriers to developing these kinds of solutions, the costs and benefits of more portable client data, privacy and security considerations, and possible technical standards in this area.

To that end, the group issued a consultation paper on data portability and e-KYC, “with a particular emphasis on how data portability procedures may be able to facilitate reduced friction and burden in the client onboarding process without unduly compromising investor protection.”

Alongside easier onboarding, which could help firms meet their KYC obligations and facilitate suitability assessments, the paper also contemplates making it easier for clients to share their data between firms, which could make it easier for them to switch firms and to open accounts at new providers — “promoting competition and empowering consumers.”

Following the consultation, which seeks feedback by May 19, the participating regulators would potentially launch a test environment that would allow eligible firms to pilot their innovations “in a controlled space, within pre-defined parameters and timeframes,” the paper noted.

Quebec’s Autorité des Marchés Financiers said it intends to participate in the testing phase, along with the regulators that are part of the consultation.

“Governments around the world are exploring how to give users greater control over their own data, while also providing safeguards for data privacy. The CSA wants to better understand how this trend — and the corresponding technological solutions — mesh with current securities regulations, and what changes might be necessary to facilitate those innovations,” said Brenda Leong, chair and CEO of the British Columbia Securities Commission, in a release.

The CSA said it sees the consultation on data portability as the first of several topics that could be explored through the CSA Collaboratory initiative.

“The acceleration of technological change is having profound effects on the investment market. As regulators, we need to anticipate those changes,” Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission, in the release. “The CSA Collaboratory will allow us to engage more intensively with both established market participants and innovative businesses pioneering new tools and business practices, and hopefully assess those innovations under real-world conditions.”