IAP's 2025 report calls out proprietary shelves, long-term asset funds and lagging CFR compliance
Ontario's retail investor watchdog is pushing the OSC to lock in binding OBSI authority, rein in bank dealer sales practices and put teeth behind the Client Focused Reforms.
That is the message running through the 2025 Annual Report from the Ontario Securities Commission's Investor Advisory Panel. For Canadian wealth advisors, dealers and fund managers, it reads less like a policy review and more like a preview of the regulatory pressure points heading their way.
The Panel kept a full schedule in 2025, holding 11 meetings and filing 11 submissions to the OSC and the Canadian Securities Administrators, plus five more to other bodies. The thread running through all of it is straightforward: investor protection belongs in every corner of the OSC's mandate, including the parts that deal with capital formation and competitiveness.
Dealer compliance is front and centre. A CSA and CIRO review of registrant practices under the Client Focused Reforms, published in December 2025, found that "compliance with the CFRs has not been consistent across the industry." Reviewers flagged shortcomings in how firms gather information about client risk tolerance and capacity, document Know Your Product work, vet model portfolios, monitor products for material changes, run suitability assessments and train staff. The IAP suggested that both industry participants and investors would benefit from a comprehensive evaluation of the CFRs against the original objectives that prompted them.
The Panel was just as direct about the OSC and CIRO review of bank-affiliated mutual fund dealers. The survey found that 94 per cent of respondents could only offer proprietary funds, and that, at least sometimes, product recommendations have been made that are not in the best interests of clients. The IAP wants the OSC to revisit what counts as a "reasonable range of alternatives" on a proprietary shelf, and to give retail branch clients clearer information about the duties owed to them by branch employees.
On redress, the Panel renewed its long-standing call for binding decision-making authority for the Ombudsman for Banking Services and Investments. It described the file as "long overdue" and noted that the OBSI compensation limit has not increased since the service was established in 1996. At minimum, the Panel said, that cap should be adjusted automatically with inflation going forward.
The IAP also weighed in on artificial intelligence, recommending a principles-based approach with a "human in the loop," and guidance that makes clear "responsibilities (including liabilities) for the risks associated with the deployment and use of AI tools and strategies are clear to all market participants and investors."
Product trends got close attention. 2025 was the first year that ETF launches in Canada outpaced mutual fund launches, with rising flows into digital-asset and single-stock ETFs - a mix the Panel says is anticipated to exhibit much higher volatility than a more traditional ETF. On ETF disclosure, the IAP wants information that is clear, easy to understand and that refers to the reason for the disclosure and why it should be considered in making an investment decision.
The Panel was cooler on the Long-Term Asset Proposal, which would open long-term illiquid assets to retail investors through an investment fund structure. Those investments, it said, "would not be suitable for the average retail investor." If the initiative moves ahead, the IAP wants enhanced disclosure and reporting, mandatory third-party independent valuations, investor interventions such as risk acknowledgements and attestations of understanding, and distribution only through the advisory channel. It pressed for similar investor-protection conditions on the self-certified investor prospectus exemption and the proposed semi-annual reporting pilot for certain venture issuers.
There is more on the IAP's wish list that advisors will recognize: reducing or restricting digital engagement practices and gamification, not only in the order execution only channel but in retail investing more generally; additional measures to regulate finfluencers; enhanced freeze powers, the power to dispose of frozen assets and higher sanctions for enforcement; and harmonization with the Financial Services Regulatory Authority on the proposed ban on chargebacks in the distribution of investment fund securities.
Looking to the year ahead, IAP Chair Jim Sinclair said the Panel will keep focusing on "the impact of new developments on retail investors and the capital markets, and the need for new strategies and tools, along with a regulatory framework that is proportionate, and maintains a focus on investor protection and the rule of law."
The full text of the 2025 Annual Report is available at https://www.osc.ca/sites/default/files/2026-05/iap_20260512-annual-rpt.pdf.
