Ontario budget voices support for OBSI reform

The Ontario government has expressed support for regulators’ efforts to enhance dispute resolution for investors.

The Canadian Securities Administrators (CSA) recently completed a consultation on proposed reforms to dispute resolution, highlighted by a proposal to introduce binding authority for compensation recommendations from the Ombudsman for Banking Services and Investments (OBSI).

Tuesday’s Ontario budget didn’t take a position on the specific reforms contemplated by the CSA, but did say the government “supports the ongoing work of the Ontario Securities Commission (OSC) to modernize the dispute-resolution framework available to Ontario investors and remains committed to a modernized capital markets framework that protects investors.”

Government support for the initiative is critical, as fundamental reform to the dispute-resolution system is expected to require legislative changes.

In terms of bolstering investor protection, the provincial budget said the OSC is still working to develop rules that would create a new process for distributing disgorged funds to harmed investors.

Last fall, the government tabled legislation to enable the new process for paying out disgorged funds, which will take effect once rules governing the new distribution procedure are adopted.

At last count, the OSC’s war chest of accumulated sanctions topped $120 million.

Alongside the references to investor protection, the budget signalled the government’s support for other efforts to modernize markets.

“The government and the OSC continue to evaluate and implement, as appropriate, recommendations from the Capital Markets Modernization Taskforce,” the budget said. So far, 21 of the taskforce’s recommendations have been adopted, the budget said, and several others are expected to be implemented by 2025.

The government said it’s also supporting efforts to enhance capital formation — including working with the OSC on a framework to support increased investment in long-term assets, such as infrastructure.

And it noted the OSC is working on initiatives to bolster investment in early-stage companies: “The OSC is working to develop rules to support angel investor groups and broadening sources of capital by adopting a self-certified prospectus exemption,” the budget said.

Last week, regulators in Alberta and Saskatchewan, which first introduced a self-certified prospectus exemption, announced rule changes to make it a permanent feature of their markets. Earlier this year, the OSC extended its version of the self-certified exemption — which was set to expire on April 25 — to October 25, 2025.

The exemption allows investors who don’t meet the financial thresholds to qualify as accredited investors but have certain financial expertise to vouch for their knowledge and sophistication, allowing them to participate in exempt offerings alongside accredited investors.

Additionally, the government noted the OSC is developing rules to support angel investor groups, that it’s broadening the participation of investment dealers in prospectus offerings, and that it supports the regulator in its work to increase the involvement of Indigenous businesses and communities in the capital markets.