The Ontario Securities Commission has set up an internal task force to examine its rules and regulations as well as ways to “lighten the load” for businesses.
The OSC’s chair and chief executive officer, Maureen Jensen, announced on Thursday the launch of a “Burden Reduction Task Force” as part of a longstanding desire to examine the compliance burden on the firms the commission regulates. At the same time, the new task force comes on the heels of the Ontario Finance Minister’s surprise decision to oppose recommendations by provincial regulators that would prohibit particular investment fees, known as deferred sales charges (DSCs), on mutual funds.
“It is so important that everyone in this room understands that we will follow what the government wishes and we really believe our minister’s support is critical, as it is going forward for every single regulatory branch,” Ms. Jensen said in a panel discussion at the OSC’s annual conference on Thursday.
“We’re going to look at all of our regulations and we’re going to see which ones are appropriate for short-, medium- and long-term change to reduce burden, make it easier on market participants but still keep the focus on investor protection,” Ms. Jensen said in an interview with The Globe and Mail.
Tackling regulatory burden has been on Ms. Jensen’s agenda since stepping into her role as chair in 2016, when she addressed the issue in her first keynote speech discussing the Ontario Securities Act and the number of rules and regulations it contains.
“When considering new regulations, we are cognizant of the need to remove as much as we add,” she said during her first keynote. “The challenge is to craft regulation that doesn’t get in the way of business and still protects investors.”
Ms. Jensen said Thursday that the dramatic change in approach shown by the Doug Ford administration was unexpected, but it provides the OSC an opportunity to review their rules as well as regulatory burden through a new lens. Ms. Jensen declined to comment on the nature of any discussions with Finance Minister Vic Fedeli.
“Now that the government is really focused on red tape, that gives us an opportunity to ensure we’re delivering something of value to them and it gives us the opportunity to propose changes that we otherwise wouldn’t have been able to get traction on," Ms. Jensen told The Globe.
“This is about how every time you have a change in government or a change in the businesses we regulate, we’ve got to look back at our rules and our regulations and how we do our compliance work and make sure they’re fit for purpose.”
After six years of work including industry consultation, the Canadian Securities Administrators introduced new rules Sept. 13 that prohibited deferred sales charges in mutual funds. The same day, Mr. Fedeli announced the Ford government opposed the new rules.
Some in the industry believe DSC funds help smaller investors gain access to financial advice, as the model does not require an upfront payment from clients. It may also prevent investors from making early withdrawals from their retirement savings.
DSCs charge clients as much as 6 per cent to cash out their mutual funds, a fee that typically falls by one percentage point each year, down to 0 per cent after five to seven years. About 18 per cent of all mutual fund assets in Canada – about $300-billion – carried the DSC option at the end of 2016.
During the OSC’s keynote discussion Thursday, Power Financial’s Paul Desmarais III said he was surprised by the “quick success” Power’s subsidiary IGM Financial had at eliminating the controversial DSC funds over the past two years.
“I was surprised by the growth that comes by doing the right thing,” he said. “IGM eliminating the DSC and the incredible growth that came from that act, empowered the advisers to be able to say ‘I am aligned with the consumers.’"