OSC wants to see better advice from banks

The Ontario Securities Commission (OSC) hopes to enhance the broader experience of investors, not just investor protection, under its new strategic plan released Friday.

That plan identified the OSC’s central goals for 2024 to 2030. The goals include tougher, more visible enforcement; a shift toward anticipating and planning for trends that are likely to require regulatory attention; and increased support for capital formation and innovation, particularly for early-stage ventures.

In the advisory channel, the OSC plans to build on the progress made by the client-focused reforms in addressing conflicts of interest, product knowledge and proper disclosure.

Speaking at an event hosted Friday by the C.D. Howe Institute in Toronto, Grant Vingoe, CEO of the OSC, said he remains concerned about the quality of advice provided to some investors, the proficiency of certain advisors and the narrowing of product selection, particularly at banks.

“Over time, the evolution of the client-focused reforms is going to lead to another step that has to take into account competitive factors to make sure that there’s a reasonable range of products, including independent products, that are available to Canadians,” Vingoe said.

He added that advice given at bank branches must be “more proficient and [have] more components of financial planning brought to bear,” and be accessible to people “even if they’re not wealthy and receiving the highest level of fiduciary advice.”

In November 2021, Ontario Finance Minister Peter Bethlenfalvy asked the OSC to investigate concerns around banks restricting their branches’ product shelves to proprietary funds. The OSC submitted its report less than four months later, but no action was announced as a result.

In December 2023, the federal Department of Finance asked in a competition-focused consultation whether large banks should be required or incentivized to offer third-party products and services.

The OSC’s strategic plan also highlighted a shift in the agency’s approach to retail investors.

“We will have an increased focus on do-it-yourself investors to ensure that they have the tools, information and range of choices they need to support their independent investing activities,” the OSC said in its plan.

“At the same time, we understand the value of advised channels and will support initiatives that enhance the investor’s experience when they receive advice, whether through traditional brokerage or fiduciary accounts.”

On the enforcement side, the OSC said it intends to take on more difficult cases and seek greater attention for that work.

“We’ll bring cases where we might not be successful, but we’re sending a message,” Vingoe said.

“Widely publicizing high-profile cases that showcase advanced capabilities of OSC enforcement investigations remains a strong deterrent to future misconduct and will be one of our core enforcement strategies,” the regulator said in its plan.

The regulator is searching for an executive vice-president of enforcement after longtime director of enforcement Jeff Kehoe left the agency earlier this year.

The OSC said it will do more to collect sanctions from wrongdoers and to return more money to harmed investors. “We will seek out new tools and authority to address wrongdoing along the compliance-enforcement continuum,” the plan noted.

In terms of capital formation, the OSC said it wants to provide more support to early-stage companies raising capital, with new and enhanced exemptions likely coming in the short term. The regulator said it will consider expanding opportunities for investors with the right risk appetite to participate in these sort of speculative ventures, which also supports the goal of improving the investor experience.

In March, securities regulators in Alberta and Saskatchewan permanently enacted rules that allow investors without the financial resources to qualify as accredited investors to nevertheless claim an exemption based on their financial knowledge.

The OSC also aims to address the needs of underserved communities, such as immigrants and vulnerable investors.

“By placing a more deliberate and targeted focus on the specific needs of different types of investors, we can help to facilitate their engagement with our markets and support them in navigating the increasingly complex investing landscape,” the plan said.