In 2014, when the IMF analyzed Canada’s adherence to international standards for the financial sector, the results were mixed. The Autorité des marchés financiers (AMF), the body that regulates Quebec’s financial market, was found to be operating well and in a manner aligned with international standards.
The same could not be said for the Financial Services Commission of Ontario (FSCO), however, which the IMF found to be performing not as well and taking more of a reactive rather than proactive approach towards regulating the industry.
Then, the IMF’s auditor general took a closer look and found that FSCO was not effectively serving its mandate with respect the sectors it regulates. The auditor discovered delays in the handling of complaints and again an attitude of reactivity. Following that, an independent advisory panel was asked to look at FSCO’s mandate.
“It found that the regulator lacks the resources and governance structures to be effective; that it needs to be independent of the government and properly funded,” explains Jill McCutcheon, partner at Borden Ladner Gervais.
In response to FSCO’s struggles and the panel’s findings, Ontario Finance Minister Charles Sousa announced plans for the creation of a new provincial Financial Services Regulatory Authority (FSRA), in an attempt to enhance “financial protection for consumers and modernizing the regulation of pensions and financial services.”
“Although the creation of FSRA has been announced, there is certainly more legislative work to be done because it’s a little vague as to what exactly will happen,” McCutcheon says. “They have established FSRA, though, so we can assume that the point it is to kick financial regulations up a notch.”
Some of the recent draft report’s key recommendations include new regulations for financial planning in Ontario, but what will that mean for the province’s advisors?
“It’s hard to know what the full impact will be,” McCutcheon says. “There is a feeling that there needs to be a level playing field and that there are a lot of different types of financial planners and advisors out there using the title. I think the government wants to make sure that the financial planner title is reserved for people with the necessary qualifications to be creating a comprehensive financial plan – that very much aligns with the approach in Quebec.”
It’s also expected that the new regulator will place a higher level of scrutiny on the ways in which advisors sell products. “Another issue will be will be referral arrangements,” McCutcheon says. “They’ve been pretty clear that they’re not against referral arrangements as a matter of public policy, but that referrals should only be between licensed people in the various sectors, not between licensed and unlicensed individuals.”
Although there is plenty of uncertainty around FSRA’s mandate, one thing is for sure: things are going to change for Ontario’s advisors. The days of operating under a relatively passive industry regulator will soon be a thing of the past. “We need to know what FSRA’s full powers are going to be, and I think that information will come in the ensuing months,” McCutcheon says. “I expect there will be a lot of activity around this in 2017 and advisors can assume there will be more supervision of how they conduct their business.”
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