Reducing Regulatory Burden - Highlights from the OSC’s Third and Final Roundtable

As discussed in our recent posting, the Ontario Securities Commission (OSC) has identified regulatory burden reduction as one of its key priorities for the coming year. The Ontario government is actively encouraging these initiatives. The OSC recently established a Burden Reduction Task Force and announced a series of related roundtable discussions for stakeholders.

The third and final roundtable of the series was held May 27 on topics related to trading, marketplaces, issuer requirements and derivatives.

Marketplace participants attending the roundtable made suggestions for change that include:

  1. Ontario should consider joining the Passport System, a regulatory system that has been adopted by all Canadian provinces and territories except Ontario. This would eliminate duplication of regulatory review efforts in connection with various filings by market participants whose principal regulator is not the OSC but who wish to access the Ontario capital markets. Passport is a system that allows a market participant to access the capital markets of all other Passport participating jurisdictions relying only on the decision of its principal regulator. The OSC makes its own decisions, so non-Ontario market participants must currently also interface with the OSC to access the Ontario capital markets.
  2. The inter-dealer market should be exempt from proposed derivatives business conduct and registration rules. The inter-dealer market operates telephonically and electronically for trading in products such as government bonds between parties including investment dealers who trade in size and need to be satisfied that their counterparties are creditworthy. The compliance cost associated with these regulations would have a significant impact on Canada’s global competitiveness in this space.
  3. Principles-based regulation together with related regulatory guidance is an approach that offers greater flexibility than rules-based regulation. There is a risk that regulators sometime treat guidance as mandatory rather than explanatory. This “calcifies” guidance into rules, which is inconsistent with a principles-based approach.
  4. Exchanges and Alternative Trading Systems (ATSs) are required to file an annual consolidation of their Form 21-101F1 or F2, respectively, to capture all Form amendments filed during the previous year. The annual consolidation is accompanied by a CEO certification that the consolidation captures all such amendments. The requirements to file a consolidated Form should be replaced by the standalone CEO certification, since the OSC already has access to all the interim Form amendments filed during the previous year.
  5. Exchanges and ATSs are required to file quarterly a Form 21-101F3. The majority of the information included in this form is already available to the OSC through other means, so the reporting may be duplicative.
  6. Exchanges and ATSs are required to report material systems outages, but this information is already available to regulators through other means, so the reporting is duplicative.
  7. Regulatory requirements should be scalable so that a smaller mutual fund dealers are not subject to the same level of regulatory obligations as large national dealers.
  8. It would be beneficial to create a secure, centralized digital repository where historical information included in past Personal Information Forms (PIFs) filings would be stored. This way, individuals filing PIFs could more easily reconstruct historical information required for new PIF filings.

OSC Chair Maureen Jensen announced that next steps on the burden reduction process are to prioritize ideas that can be advanced by the OSC, categorize them into short-, medium- and long-term initiatives, and publish a report to explain what actions will be taken by the OSC and why, and invite further public consultation. The timing of this report and related public consultations has not been finalized.

The OSC will also make an announcement in the next few months regarding the creation of a new Office of Economic Growth and Innovation within the OSC. As discussed in our previous post, the Ontario government supports the creation of this Office, whose three core strategic objectives would be:

  • to bolster capital formation in Ontario;
  • to promote the proliferation of technology to reduce costs, increase competition and accelerate innovation in financial services; and
  • to collaborate with businesses and other regulators to gain insights on how to support innovation, facilitate competition and reduce regulatory burden.

OSC regulatory burden reduction roundtable Office of Economic Growth and Innovation

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