Key priorities

On April 18, 2023, the Ontario Securities Commission (OSC) published its Statement of Priorities (Statement) for the fiscal year ending March 31, 2024. The Statement sets out four strategic goals the OSC intends to focus on, above and beyond its fundamental core regulatory operations, providing stability, transparency and continuity in the regulation of Ontario’s capital markets.

1. Building trust and fairness in Ontario’s capital markets

Promoting confidence in Ontario’s capital markets among market participants and investors is a core mandate of the OSC, and it is committed to carrying this mandate through a balanced policy framework, access to information to make informed investment decisions, exercising effective compliance oversight and pursuing timely and vigorous enforcement. The initiatives that the OSC will be prioritizing in 2023-2024 include:

• Advance work on environmental, social, and governance (ESG) disclosures for reporting issuers: Advancing work on ESG disclosures for reporting issuers, including a focused review of ESG disclosures by investment funds, [1] is a key priority for the OSC in achieving the goal of building trust and fairness in Ontario's capital market. In supporting Canadian Securities Administrators (CSA) policy work in this area, the OSC plans to, among other things,
  1. lead the consideration of international developments and how they may impact or further inform the proposed National Instrument 51-107 Disclosure of Climate-related Matters [2] ;
  2. engage in further targeted consultations, including with Indigenous organizations.

• Consider broader diversity on boards and in executive roles at reporting issuers: The Statement provides that the OSC will publish for comment proposed changes to the disclosure requirements on diversity, board renewal and the director nomination process and related corporate governance guidelines and consider the feedback from stakeholders in the first quarter of fiscal 2023-2024. The OSC’s planned outcome is for investors to have access to the diversity and board renewal information needed to inform their investment and voting decisions.[3]

• Incorporate Indigenous Peoples’ issues and perspectives into CSA policy work: The Statement states that through the CSA Taskforce on Indigenous Peoples in the Capital Markets, announced in June 2022, the CSA will continue to enhance consideration of Indigenous Peoples and communities and work to integrate these considerations in relevant areas of securities regulation and CSA policy work.

• Complete the development of the over-the-counter derivatives regulatory framework: In its effort to continue enhancing the domestic derivatives oversight framework, the OSC intends to finalize and implement the Derivatives Dealer Business Conduct Rule and publish final amendments to the Derivatives Trade Reporting Rule by the third quarter of fiscal 2023-24.[4] If approved, the proposed Derivatives Fee Rule provides the necessary funding for the ongoing oversight of the derivatives regulatory framework from the entities most active in the derivatives market.

• Implement the new single enhanced self-regulatory organization (SRO): The Statement affirms the OSC’s commitment to streamlining these organizations and establishing a new SRO in line with the recommendations of CSA Position Paper 25-404.[5] Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada amalgamated to continue as the New Self-Regulatory Organization of Canada, effective January 1, 2023, which subsequently changed its name to the Canadian Investment Regulatory Organization on June 1, 2023.

2. Strengthening investor safeguards

Recognizing the fast pace of change in financial markets with the attendant effect of increased complexity, the OSC vows to stay committed to “investor protection” through various initiatives that are focused on what the OSC calls “the lifeblood of our capital markets.” These include: 

• Expand the focus on retail investors through specific education, policy, research and behavioural science activities: The Statement says that the OSC will continue to identify ways to improve investor education, financial literacy and protection, responding to changing demographic profiles of investors and shifts in investing behaviour.
• Strengthen investor redress and the Ombudsman for Banking Services and Investments (OBSI): The OSC is committed to strengthening OBSI, an ombudsman program developed as an independent dispute resolution service and redress for those who have issues with registered firms. The OSC’s plan, in collaboration with the CSA, is to develop and publish for comment a proposal to provide OBSI with the authority to make binding compensation decision.

3. Adapting regulation to align with innovation and evolving markets

The OSC is keen on continuing to modernize its “regulatory framework” to respond to developing trends and changing business models and practices and anticipate changing market conditions and investor needs in an adaptive and forward-looking manner. Balancing investor protection while reducing undue barriers to innovation and capital formation will be carried out through some of the following initiatives:

• Strengthen oversight and enforcement in the crypto asset sector: Coordinating with the CSA and Investment Industry Regulatory Organization of Canada, the OSC will continue to apply regulatory obligations to crypto firms while completing the registration or approval process, including obtaining preregistration undertakings from firms pending completion of the registration or approval process, and facilitating crypto firms becoming IIROC members.[6] The OSC commits itself to continue identifying and addressing any non-compliance by crypto firms with securities laws and that it will continue to add crypto firms to investor warning lists.[7]
• Streamline periodic disclosure requirements for corporate finance and investment fund reporting issuers: The OSC and CSA continue to review feedback received to the proposed Amendments to National Instrument 51-102 (51-102) Continuous Disclosure Obligations and Other Amendments and Changes Relating to Annual and Interim Filings of Non-Investment Fund Reporting Issuers published in May 2021[8], including proposals to “streamline and clarify” certain disclosure requirements for management’s discussion and analysis (MD&A) and the annual information form (AIF). OSC’s collaboration with CSA in this area includes combining the financial statements, MD&A and AIF in one reporting document under 51-102, called the annual disclosure statement for annual reporting purposes, which would improve usability and decrease time commitment for investors and analysis. A combined document should also be more intuitive for most cross-border investors that are already familiar with the presentation of financial statements, MD&A and AIF in one reporting document, such as the Form 10-K.
• Complete transition to SEDAR+: The Statement further confirms the OSC’s commitment to finalizing the transition to SEDAR+, which will be launched as an online national system that is more responsive to current and future needs of market participants. SEDAR+ replaces CSA’s legacy platform for filing, disclosing and searching for information in the Canadian capital markets. As of its most recent update[9], the CSA is planning for SEDAR+ to launch on July 25, 2023, but the CSA has also set September 12, 2023, as a contingency in case of any delays with its data migration. As the current version of SEDAR is expected to shut down on July 20, 2023, the CSA has issued a Blanket Order to provide exemptions from filing documents on SEDAR+ during the transition period extending between the shutting down of the existing version of SEDAR and the launch of SEDAR+.

4. Enabling the OSC to deliver effective regulation

The fourth goal articulated in the Statement highlights OSC’s commitment to strengthening and enhancing its current and long-term capabilities through investments in its people, internal policies and processes, systems and data capabilities to enable the organization to deliver on its regulatory mandate. The Statement also articulates the OSC’s commitment to promoting diversity and inclusion by, among other things, enacting policies and practices that are equitable and inclusive for all employees, including in the areas of recruitment, talent development, code of conduct and respectful workplace.[10]

The Statement reflects its continued commitment to further previous regulatory goals, but with a renewed focus on emerging trends and drivers of change – including financial innovation, environmental, social and governance (ESG) investing and crypto assets. We expect the CSA and OSC to continue to monitor market developments while undertaking the requisite actions to achieve its goals and priorities included in the Statement.

For more information on this topic, please contact the author, Dan Cerchia.

[1] https://www.osc.ca/en/securities-law/instruments-rules-policies/8/81-334/csa-staff-notice-81-334-esg-related-investment-fund-disclosure
[2] In October 2021, the CSA published proposed National Instrument 51-107 Disclosure of Climate-related Matters for comment. The proposed instrument would require reporting issuers (other than investment funds) to disclose certain climate-related information in compliance with Ontario’s Task Force on Climate-Related Financial Disclosure recommendations (subject to certain modifications).
[3] https://www.dentons.com/en/insights/articles/2023/april/27/continued-focus-on-diversity
[4] The proposed derivatives business conduct rule was initially published for comment in April 2017 and again in June 2018. The rule was developed to help protect derivatives market participants by improving transparency, increasing accountability, and promoting responsible business conduct by dealers and advisers in the OTC derivatives market.
[5] https://www.osc.ca/en/industry/market-regulation/self-regulatory-organizations-sro
[6] https://www.osc.ca/en/securities-law/instruments-rules-policies/2/21-329/joint-canadian-securities-administratorsinvestment-industry-regulatory-organization-canada-staff.
[7] https://www.dentons.com/en/insights/articles/2023/may/5/the-canadian-securities-administrators
[8] https://www.osc.ca/en/securities-law/instruments-rules-policies/5/51-102/proposed-amendments-national-instrument-51-102-continuous-disclosure-obligations-and-other.
[9] https://www.securities-administrators.ca/about-sedar/sedar-transition/launch/
[10] https://www.dentons.com/en/insights/articles/2023/january/4/the-csas-year-8-report-on-women-on-boards-and-in-executive