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The Ontario Teachers’ Pension Plan Fund is among 22 firms settling the SEC’s charges.Matthew Sherwood/The Globe and Mail

In the latest sign that the days of the passive pension fund are waning, Ontario is moving to reduce restrictions on how much of a company its pension funds can control – even as a federal decision on the issue is at a standstill.

Ontario said in its recent economic outlook and fiscal review that it would move to eliminate the "30-per-cent rule," which restricts provincially regulated pension funds from owning more than 30 per cent of the voting shares of a company anywhere in the world.

It's a rule other countries' pension plans don't play by. And even in Canada, funds have found ways around the rule by introducing complicated structures to deals. But that strategy takes extra time and money, and might deter other potential investors from becoming partners on transactions.

Ontario is forging ahead with a clear mission: Encourage more pension plans to invest in the province and spur economic growth. The Financial Services Commission of Ontario, which administers the province's Pension Benefits Act regulations, oversees 7,059 pension plans, which range from large, well-funded public plans such as the Healthcare of Ontario Pension Plan with $60-billion in net assets, to small, private employer plans with just a few members.

There are already exemptions for some special asset classes, allowing investments in real estate, investment firms and resource companies to bypass the rule. Ontario "had been looking at providing a further exemption for investments in public infrastructure, having identified this as an opportunity in 2013," according to the recent outlook report.

Infrastructure is the perfect example of how pension funds have turned from passive stock-and-bond investors into global players in alternative asset classes – a development that has made the 30-per-cent rule feel out of date.

But Canada has been a less attractive market for infrastructure investments because of the size, scale and returns that projects offered, particularly when it comes to public-private partnership deals. Some institutional investors also favour "user-pay" models, in which roads and bridges charge tolls while also being government funded. These structures aren't popular with taxpayers in Canada.

The federal government is trying to attract more infrastructure investment, most recently with the Liberals pledging to spend billions more on transit, hospitals and seniors' long-term-care homes.

Ottawa said in the most recent budget it would review the 30-per-cent rule and hoped to "reduce red tape and improve the investment climate." The rule applies to all federal funds, but was also rolled into some provincial legislation, meaning pension funds in provinces such as Ontario have been bound by similar restrictions. A consultation paper with perspectives on both the benefits and the potential impact of a change to the rule was supposed to be due by the end of the year.

But the election may have put that on the back burner. "Announcements made by the previous government that have not yet been implemented will be reviewed on a case-by-case basis," said David Barnabe, a spokesman for the Department of Finance.

Pension funds such as the Ontario Teachers' Pension Plan have been calling to abolish the rule for years. In 2009, Teachers called the rule disadvantageous and outdated, saying it increased costs and limited investment options at home and abroad, and created an environment in which foreign competitors could acquire Canadian businesses that the country's own pension funds could not.

Former Teachers' chief executive officer Jim Leech tweeted his support for the rule's end, saying it had "long been a huge unnecessary cost for pensions."

It's worth noting that this change would benefit big-name plans like Teachers more than the many smaller pension plans that invest primarily in pooled funds and haven't developed private-equity capabilities.

Ontario plans to describe the new proposed regulation in more detail in early 2016.

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