Ontario Premier Doug Ford’s government is seeking to put its own business-friendly stamp on Canada’s biggest capital market, but some fear the measures being proposed push too far onto turf usually reserved for arm’s-length regulators.
Ford and his governing Progressive Conservatives put forward a five-point plan in last week’s provincial budget that they said was aimed at “creating confidence” in Ontario’s bond and stock markets.
Among the steps being proposed are putting the Ontario Securities Commission’s already launched “Burden Reduction Task Force” to work, setting up a new “Office of Economic Growth and Innovation” inside the OSC, requiring the regulator to provide more of an economic justification for the rules it makes and improving investor protections and competitiveness in the industry.
So far, the financial industry appears to be supportive of the government’s policies. The Investment Industry Association of Canada said last week that it “welcomes the Ontario government’s efforts to cut red tape, reduce business costs and support Ontario’s capital markets,” calling the latter plan “credible.”
But the government’s approach is raising some eyebrows among others who follow the industry.
“I find it concerning and problematic to see the Ford government step into the regulatory agenda of an arm’s length regulatory agency,” Anita Anand, a professor of law at the University of Toronto, said in an email.
Anand, who also holds the J.R. Kimber Chair in Investor Protection and Corporate Governance at U of T, said she was concerned about what reducing regulatory burdens could mean for investor-protection initiatives, two goals that are often at odds with each other.
The OSC’s Burden Reduction Task Force already has a mandate to target “unnecessary” requirements, but the budget states that, “in alignment with the government’s priority,” the task force would focus on finding ways to save businesses time and money.
Similar-sounding goals would be set for the OSC’s new Office of Economic Growth and Innovation. According to the budget, the office’s objectives would include supporting capital formation in the province (“to ensure that Ontario is Open for Business and Open for Jobs within the capital markets space”) and promoting greater use of technology to cut costs and increase competition.
Meanwhile, the element of the plan that will see the OSC take steps to “improve the investor experience and investor protection,” also states that the government is set on working with groups such as the Investment Industry Regulatory Organization of Canada (IIROC).
Having government officials go around a regulator and deal directly with a self-regulator, such as IIROC, is unusual and could lead to confusion and problems, according to Ken Kivenko, an investor advocate and president of Kenmar Associates.
The two organizations, for example, may have opinions that differ on certain subjects, he said.
“If it was just the only thing with the budget, we’d say, ‘Well, it’s probably well-intentioned,’” Kivenko said. “But in terms of the overall context, of all the little things they’re doing, it’s worrisome.”
The requirement for “economically focused rule-making” is being met with some skepticism as well. While the OSC is already supposed to lay out the expected costs and benefits of a proposed rule, the Ontario Tories are looking for a “qualitative and quantitative analysis.”
“This approach will ensure there is a more robust cost-benefit analysis provided with the OSC’s rule publications that would enhance transparency and better inform industry stakeholders and investor advocates of the impacts of new proposals,” a spokesperson for Finance Minister Vic Fedeli said in an email.
Anand, however, noted that the OSC is an independent regulator with a “very precise” process for making rules.
“Provincial governments do not typically weigh in with their views regarding how an independent agency fulfills its statutory mandate,” she said. “This is why it is incredibly concerning to me to see the Ford government insert itself into the purview of an independent regulatory body.”
Kivenko said the analysis could also throw up roadblocks to any new rule, such as ones geared towards social policy-making that may be harder to put a price-tag on.
It is incredibly concerning to me to see the Ford government insert itself into the purview of an independent regulatory body
“It becomes an endless debate and things which should be reformed over 18 months could take five years, six years,” he said. “Or the OSC just get exhausted, the regulator just get exhausted, and you say ‘We’re not going to fight with Bay Street anymore, let’s move on to another topic.’”
While Kivenko called the overall plan “disappointing,” the Ford government says the changes are part of making Ontario a more attractive destination for investment.
“Critical to this is creating a globally competitive, efficient and strong capital markets regulatory system that attracts investment from around the world, streamlines capital raising for businesses, and protects investors from financial system risk and misconduct,” Fedeli’s spokesperson said.
An emailed statement from Maureen Jensen, chair and CEO of the OSC, said her organization is “excited” by the opportunities for updating regulations.
“In particular, we welcome our government’s support for more rigour and transparency in our rule-making process and service standards — both areas we continue to engage with stakeholders on as part of our wide-ranging consultation on ways to reduce regulatory burden and improve the investor experience,” Jensen said.
The budget said the government plans to make further legislative changes, such as “clarifying the payment of awards under the OSC whistleblower program.” In February, the OSC said it had awarded approximately $7.5 million to three whistleblowers, the first-ever such payouts by a Canadian securities regulator.
Also included in the province’s fiscal plan is a vow to put forward legislation that would “protect titles” for financial planners and financial advisors. Individuals who want to use those titles would have to have an “appropriate credential,” the budget says.
FP Canada, the former Financial Planning Standards Council, hailed the move, saying it would provide clarity and help consumers make “informed decisions” about who to ask for financial advice.