CRM3, DSCs, new SRO top OSC agenda

Introducing tougher cost reporting requirements for the fund industry, ensuring compliance with the ban on certain embedded fees, and implementing the new industry self-regulatory organization will be at the top of the Ontario Securities Commission’s (OSC) agenda for the coming year.

The regulator published its draft priorities, for the fiscal year ending March 31, 2024, for public comment, featuring a long list of initiatives.

Among some of the bigger items, the paper indicates that a proposal to introduce total cost reporting disclosure requirements — which will aim to expand and harmonize the disclosure that investors get from investment funds and segregated funds — will be coming in April 2023.

Additionally, the OSC signalled that it will be focused on enforcing compliance with the spirit and the letter of the ban on deferred sales charge (DSC) structures and trailer fees for order-execution-only firms.

“It is critical for the OSC to review emerging practices quickly that may circumvent the policy intent of the bans,” the regulator said in the draft.

To that end, it will be monitoring compliance with the new requirements, and specifically reviewing “industry practices involving the use of the principal distributor model and/or the use of dealer chargebacks that raise conflict of interest concerns.”

The draft noted that industry firms are expected to adapt to new rules and “embrace dealer compensation that allows dealers to provide objective advice to investors.”

It also said that the new SRO, which will be created from a merger of the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) by the end of this year, is on track.

For the coming year, the OSC will be working with the rest of the Canadian Securities Administrators (CSA) to launch a new oversight model for the new SRO, enabling the streamlining of registration for dual platform dealers and reps — and that they will begin work to consider expanding its mandate to incorporate other registration categories (such as portfolio managers and exempt market dealers).

Beyond these policy priorities, the regulator’s agenda includes a long list of other items, including efforts to enhance ESG disclosure requirements by issuers, improving board diversity, and enhancing redress mechanisms at the Ombudsman for Banking Services and Investments (OBSI).

“The draft priorities mark the first time our new organizational and governance structure is reflected in our plans and outline the approach we will take to address the regulatory, economic and technological environment the OSC is operating in,” OSC CEO Grant Vingoe said in a release.

“Delivering strong investor protection remains a core value in all initiatives and actions we undertake as we continue to streamline regulation and implement our expanded mandate to promote competition and foster capital formation,” he added.

The draft is out for comment until Dec. 22. Any changes to the agenda will be incorporated into its final priorities, which will be released in the spring of 2023.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.