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Ontario to introduce legislation to establish new Financial Services Regulatory Authority


November 14, 2016   by Canadian Underwriter


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The Ontario government has announced that it will introduce legislation to establish the initial parameters for the Financial Services Regulatory Authority (FSRA), “a new independent and flexible regulator of financial services and pensions that, once established, would be more consumer-focused and improve protections for consumers, investors and pension plan beneficiaries.”

businessman signing documentsLast November, a panel appointed by the Ontario Ministry of Finance recommended the creation of the FSRA as one of 37 recommendations contained in the Review of the Mandates of the Financial Services Commission of Ontario (FSCO), Financial Services Tribunal (FST) and the Deposit Insurance Corporation of Ontario (DICO). The preliminary position paper from panel members George Cooke, James Daw and Lawrence Ritchie made recommendations related to mandate; governance; structure; tools, means and regulatory approach; and the FST.

Ontario Finance Minister Charles Sousa announced the introduction of the FSRA legislation in his 2016 Ontario Economic Outlook and Fiscal Review, released on Monday. The outlook’s section related to “Fostering a More Innovative and Dynamic Business Environment” also included, among other topics:

  • Allowing fleet insurance, approved by FSCO, to be offered on an interim basis for vehicles that can be hired through online ridesharing services;
  • Partnering with Airbnb to ensure guests and hosts are aware of their legal rights and responsibilities (the province announced a pilot project on the topic in February). Moving forward, the government will consult with municipalities, industry stakeholders and the public on a potential framework for homesharing in Ontario;
  • Committing $25 million to the ScaleUP Ventures Fund to meet additional capital and mentorship needs of a new generation of Ontario-based startups and entrepreneurs;
  • The Small Business Innovation Challenge pilot program, with an investment of $28.8 million over five years to help Ontario-based small- and medium-sized enterprises;
  • A four-year, $32.4 million scale-up voucher initiative “to help high-impact companies overcome barriers to their next stage of growth by funding activities such as developing and recruiting specialized talent, accessing new markets and protecting intellectual property”;
  • Passing the Climate Change Mitigation and Low-carbon Economy Act, 2016, which ensures proceeds from the cap-and-trade program will be invested efficiently for cost-effective emissions reduction;
  • Releasing the Climate Change Action Plan, which outlines key provincial actions to combat climate change, create jobs and enable people and businesses to shift to a low-carbon economy; and
  • Launching the Ontario Investment Office this fall, to “provide a one-window approach to investment attraction.”

Ritchie, a partner at Osler, Hoskin & Harcourt LLP, was one member of the expert advisory panel appointed by the Ontario Ministry of Finance to review and recommend changes to FSCO, FST and DICO (The other two were Cooke, chair of OMERS Administrative Corp. and Daw, a former Toronto Star personal finance columnist).

During the Canadian Insurance Financial Forum in Toronto in May, Ritchie stressed that a single financial services regulatory approach does not mean one-size-fits-all in response to a question from an audience member.

“Let there be no misunderstanding,” he said at the time. “We’re very sensitive to what you just said about a one-size-fits all. A single regulatory approach does not mean a one-size fits all approach at all and you’ll see that in the report. We’ve very sensitive that it be quite the opposite. Having things housed in one area with a mandate to ensure that appropriate regulation is generated actually can be fulfilled with a strong mandate.”

Ritchie said that the panel ultimately found that “each agency’s mandate continues to be relevant, however, goals and priorities should be made more explicit, there’s need for more clarity and transparency in how each agency carries out its activities and operations, it needs a governance structure and operational overhaul, there needs to be significant changes in governance structure and the associated accountability mechanisms to improve mandate alignment and accountability.”

In conclusion, he said, “the core of the preliminary recommendations is rather than tinker with the existing system, we recommended the creation of a new agency called the Financial Services Regulatory Authority, which would have a modified twin peaks approach to regulation. It would have its own corporate identity, it would be more operational distinct from government, self-funded in the sense that it would raise money from the industry and be accountable for that as its budget, [and] it would be governed by an expert board of directors.”

Among other topics, the 2016 Ontario Economic Outlook and Fiscal Review also addressed reducing electricity costs for businesses; expanding international and internal trade; child care/education/post-secondary education/health and social infrastructure; clean energy; healthcare; and retirement security.