Ontario Budget 2018: Financial Services Updates
Ontario’s Minister of Finance, Charles Sousa, tabled the government’s pre-election fiscal plan on Wednesday, March 28, 2018, the 2018 Ontario Budget: A Plan for Care and Community (the “2018 Ontario Budget”).
Financial Services Regulatory Authority
The 2018 Ontario Budget confirms the creation and implementation of the new financial services and pension regulator, the Financial Services Regulatory Authority of Ontario (“FSRA”). The Ontario government continues to work with FSRA on the transition of the current regulator, the Financial Services Commission of Ontario (“FSCO”) to FSRA, which is expected to be fully operational by April 2019. The Board of Directors of FSRA recently announced the appointment of FSRA’s inaugural Chief Executive Officer Mark White, effective May 7, 2018.
The Ontario government will introduce amendments to the Insurance Act and the Corporations Act to give FSRA oversight of certain types of insurance companies incorporated in Ontario, including publicly owned insurers, farm mutuals, reciprocals, and insurers created by legislation. The Ontario government also proposes requiring that insurers licensed in Ontario be incorporated in a jurisdiction that meets international solvency standards. Amendments to the Insurance Act will also be put forward to clarify the use of electronic communication by insurers and consumers, including certain insurance applications, policies and forms.
The Ontario government proposes certain changes to the Consumer Reporting Act under Bill 8, Access to Consumer Credit Reports and Elevator Availability Act, 2018. Bill 8 proposes to require credit reporting agencies to give consumers online access to their current consumer score at least twice a year, free of charge. In addition, Bill 8 introduces new sections to the Consumer Reporting Act setting out requirements respecting the method of generating a consumer score, and requirements for security freezes on a consumer’s file. Bill 8 also grants the Registrar of Consumer Reporting Agencies (the “Registrar”) additional enforcement rights, including the authority to order a credit reporting agency to amend or delete information on a credit report, and an expanded right of the Registrar to request information from credit reporting agencies.
Securities Regulation Developments
The Ontario government continues to play a leadership role, working with other participating jurisdictions, to establish and implement the Canadian Cooperative Capital Markets Regulatory System (the “CCMR”). The CCMR would provide a cooperative securities regulatory framework throughout the participating jurisdictions and aims to promote economic activity by fostering more efficient capital markets and providing more integrated and coordinated compliance and enforcement activities. Upon establishment of the CCMR, the intention is that staff of the Ontario Securities Commission (the “OSC”) would be transitioned to the CCMR’s newly proposed securities regulatory agency, the Capital Markets Regulatory Authority (the “CMRA”). The Ontario government is committed to ensuring a successful launch of the CCMR and will propose legislation intended to assist with OSC Staff retention and planning during this transition to the CMRA.
The 2018 Ontario Budget also proposes new enforcement tools for the OSC, including:
- New offences for breach of an undertaking and for obstructing an investigation under the Securities Act and the Commodity Futures Act;
- Authority to make automatic and non-automatic reciprocal orders for certain orders issued for court convictions or by another Canadian securities regulator;
- Streamlining the administrative penalty process for first-time violations of certain registration and prospectus requirements in the Securities Act; and
- Streamlining information-sharing processes in enforcement proceedings.
In addition to these tools, the Ontario government is proposing to establish a regulatory regime for financial benchmark administrators, contributors, and users, to reduce the risk of benchmark manipulation.
The Ontario government is moving forward with its previously announced plan to establish the Ontario FinTech Accelerator Office, which will serve a dual purpose. It will (1) assist businesses navigating regulatory requirements, while (2) informing government policies aimed at facilitating growth in the FinTech sector. The Ontario government is also continuing to work on the Regulatory Super Sandbox, as announced last year. This Sandbox will consist of new rules to exempt companies from some requirements to allow them to test new business models and products. The OSC and FSRA are working with the government to ensure the Sandbox is active when FSRA becomes operational in 2019.
Investments in Innovation and Transformative Technologies
Recognizing Ontario as a national leader in innovation, the 2018 Ontario Budget highlights some of the past investments made by the government in innovation and entrepreneurship. In 2018, the Ontario government will invest an additional $30 million to support the Vector Institute, an independent non-profit corporation mandated to drive research excellence and leadership in the creation and use of artificial intelligence (AI). The additional investment will support the Institute’s work with postsecondary institutions to help increase the number of Master’s degree graduates in AI-related fields. The Ontario government is also looking into a Data Strategy to ensure publicly funded data in Ontario is used responsibly while protecting the public interest.
In addition, the government has announced $15 million over three years for NextAI, a Toronto-based accelerator for early-stage startups that leverage AI technologies. In so doing, Ontario is continuing to support the local AI ecosystem and its entrepreneurs.
Ontario appointed its first Chief Scientist, Dr. Molly Schoichet, as part of its commitment to research and innovation in the economy. The Ontario government has also signed a Memorandum of Understanding with Quebec to develop a joint Life Sciences Venture Capital Fund. Ontario will invest up to $50 million in venture capital funds focused on life sciences.
The 2018 Ontario Budget also outlines the Ontario government’s Intellectual Property (IP) Strategy, which is focused on three main themes:
- Supporting the generation and ownership of higher quality patents by Ontario innovators;
- Educating Ontario firms to become savvy users and producers of intellectual property assets; and
- Defending and expanding the freedom to operate for Ontario entrepreneurs.
The Ontario government is seeking to ensure that IP is leveraged by firms to commercialize and grow their competitive businesses locally and internationally.
The 2018 Ontario Budget includes a number of financial services related developments, with a strong focus on innovation. It both confirms previously announced initiatives, such as the creation of FSRA, the FinTech Accelerator Office and the Regulatory Super Sandbox, and announces new developments, such as proposed changes to credit reporting legislation and additional oversight of financial benchmarks.