The Ontario Securities Commission will permit small and medium-sized investment firms to outsource the role of chief compliance officer, one of a host of proposed rule changes designed to reduce obligations on the companies it regulates, the commission will announce Tuesday.
The change means investment dealers of a small enough size will no longer be required to employ a full-time securities compliance officer on staff, which will allow external compliance experts to act for multiple firms at the same time.
The loosening of the requirement is one of 107 proposed tweaks and changes identified by the OSC in its new report, Reducing Regulatory Burden in Ontario’s Capital Markets – a year-long project that, the report states, is in keeping with the “open for business commitment” of Premier Doug Ford’s Progressive Conservative government.
In an interview, OSC chair and chief executive officer Maureen Jensen said the 2018 election of the Ford government provided an opportunity for the commission to eliminate rules that have outlived their usefulness. Speaking about the reduction of red tape, Ms. Jensen said: "It’s the reason I became a regulator in the first place.”
Citing her experience as the president of a publicly traded mining company more than 20 years ago, Ms. Jensen said the regulatory filings expected of her company were “staggering.” That experience has led her to target excessive paperwork as a regulator while, she said, maintaining the OSC’s core duty of investor protection.
In one of her first speeches as the head of the Ontario regulator in 2016, she referred to the “tsunami of regulation” that swept over the investment industry in the wake of the global financial crisis.
In the interview, she said: “I’m always looking for, ‘Why is this rule in place? What’s the outcome that you want? And could you get there in an easier way?’"
In addition to the modifications concerning chief compliance officers, the commission’s report has set its sights on many targets: regulations that result in similar types of paperwork having to be filed multiple times; rules that haven’t evolved to accommodate a digital economy; and provisions that prevent securities issuers from receiving straightforward advice.
For the first time in Ontario, the commission is creating a process that will allow a company considering an initial public offering to submit a draft prospectus for a confidential review at the outset. Previously, companies considering such a move could only receive feedback on a prospectus once it was deemed ready to be issued to investors. Similar confidential review processes are in place at the British Columbia Securities Commission and Britain’s Financial Conduct Authority.
Under the new confidential review process, which the OSC hopes to have in place in a year, Ms. Jensen said: “We can talk through all of the issues. They can have all of that advice before they paper anything."
The commission is also seeking changes to the law concerning exemption orders. Currently, if a regulated company wants to obtain an exemption from a rule, it has to individually apply and receive the exemption even if other regulated companies are seeking the same permission. The commission has asked for the government to allow it to publish blanket, industry-wide exemptions, rather than having to process dozens of such requests. The government announced support for the idea in its 2019 fall economic statement.
Many of the changes proposed in the report apply to small and medium-sized businesses with revenue of less than $100-million, a group that accounts for 70 per cent of Ontario’s securities issuers, Ms. Jensen said.
One such change is an effort to harmonize with the other provinces, through the Canadian Securities Administrators, the umbrella organization of all provincial regulators, how to regulate crowdfunding. In preparing the report, the OSC heard complaints that the patchwork rules across the country concerning crowdfunding made such a financing option “too complicated,” Ms. Jensen said.
As for how much money the exercise will save companies under the OSC’s purview, the report estimates that 21 of the 107 changes will result in an annual total savings of $7.8-million to businesses regulated by the OSC.
Ms. Jensen acknowledged that the figure is “small," but pointed out the OSC can’t put a reliable dollar figure to most of the changes they’re enacting. “We’ve estimated very conservatively on what we’re absolutely certain that they’ll save.”