Header graphic for print
Canadian Securities Regulatory Monitor News and Insight

Category Archives: OSC

Subscribe to OSC RSS Feed

Targeted Reforms Update – Most regulators abandon the “Best Interest Standard” but propose to proceed with refined “Targeted Reforms”

Posted in Advisors, Amendments, Broker-Dealers, Compliance and Supervision, CSA, IIROC, Industry News, MFDA, OSC, Registrants

The Canadian Securities Administrators (CSA) issued CSA Staff Notice 33-319 (the Notice) to provide an update on the “Best Interest Standard” and “Targeted Reforms” proposed last year in an important CSA Consultation Paper that we discussed in a previous post.

Most regulators have decided to abandon the Best Interest Standard which would have introduced a “client best interest” standard against which all registrant-client obligations would be interpreted.

The CSA will still proceed with a refined set of Targeted Reforms. Even in the absence of a Best Interest Standard in most jurisdictions, the Targeted Reforms would nonetheless … Continue Reading

Blockchain applications may be caught by Ontario’s securities law

Posted in Fintech, Industry News, OSC

The Ontario Securities Commission (OSC) has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies (DLT), such as blockchain, as part of financial products or service offerings.

The OSC emphasized that it is keen to support the innovative potential of DLT because, among other things, DLT has the potential to increase transparency and efficiencies in the capital markets. However, because of DLT’s novelty, the OSC encourages business to speak to the OSC about securities law and investor protection requirements that may apply.

The OSC has cautioned that “[p]roducts or other … Continue Reading

CSA’s 2016 Enforcement Report: insights into securities regulatory activity

Posted in AMF, CSA, Enforcement, Litigation, OSC

The Canadian Securities Administrators (CSA) recently released its annual report on the enforcement activities of its members. The CSA is an umbrella group of Canada’s securities regulators.

Summary of 2016 Results[1]

Generally, enforcement and pre-enforcement activity, and monetary sanctions imposed by regulators decreased compared to 2015 but were higher than they were in 2014.

2016 2015 2014
Monetary Sanctions $62,148,866 $138,298,796 $58,239,156
 
Restitution, Compensation and Disgorgement $349,654,379 $111,651,429 $65,717,760
 
Commenced Cases (by notice of hearing, statement of allegations, or sworn Information) 56 108 105
 
Individual Respondents 72 165 189
 
Company Respondents 72 101 92
 
Most prevalent violations Illegal Distributions
Continue Reading

Initiatives des Autorités canadiennes en valeurs mobilières sur les Fintech : bac à sable réglementaire et coopération

Posted in CSA, OSC

Le 23 février 2017, les Autorités canadiennes en valeurs mobilières (ACVM) ont annoncé le lancement d’un bac à sable réglementaire. L’objectif du bac à sable réglementaire est d’appuyer les Fintech en leur permettant de faire une demande à l’organisme de réglementation compétent afin de bénéficier d’une approche plus adaptée en matière de réglementation. Cette approche doit faciliter l’utilisation d’applications, de produits et de services novateurs chez les entreprises au Canada, tout en protégeant adéquatement les investisseurs.

Par conséquent, les ACVM évalueront au cas par cas le bien-fondé de chaque modèle et autoriseront les entreprises innovantes à s’inscrire, ou leur accorderont … Continue Reading

Canadian Securities Administrators Fintech Initiatives: Regulatory Sandbox and Co-Operation

Posted in CSA, OSC

On February 23, 2017, the Canadian Securities Administrators (CSA) announced the launch of a regulatory sandbox. A regulatory sandbox aims at supporting Fintech businesses by allowing them to apply to the regulator to benefit from a more tailored approach to regulation that balances the need to facilitate the use of innovative products, services and applications all across Canada with appropriate investor protection.

As a result, the CSA will assess the merits of each business model, on a case-by-case basis, and allow innovative businesses to register or grant them relief from certain requirements to permit them to test their products and … Continue Reading

Ontario and Australian securities regulators become fintech friends

Posted in Fintech, Industry News, OSC

On the heels of its OSC Launch Pad initiative, the Ontario Securities Commission (OSC) has announced another first – an agreement with the Australian Securities and Investments Commission (ASIC), under which innovative fintech companies in Ontario and Australia will be able to draw upon support from the combined resources of the OSC and ASIC as such companies seek to operate in the others’ market. One of the purposes of the arrangement is to help innovative fintech companies reduce regulatory uncertainty and time to market.

To qualify for the support offered by the agreement, innovative businesses will need to meet the … Continue Reading

The OSC LaunchPad – Unveiled

Posted in Fintech, Industry News, OSC

As previously announced, the OSC has opened the OSC LaunchPad which consists of a dedicated team within the securities regulator to support Fintech businesses wishing to navigate securities law requirements.

The OSC LaunchPad will offer tailored support which can include time-limited exemptive relief to allow testing of innovative products and services.

In order to be eligible to receive support from the OSC LaunchPad, a business must meet certain criteria, including:

  • Being a new or early-stage Fintech business that has not yet started operations or is applying to the OSC for exemptive relief.
  • Having a new, innovative or significantly different
Continue Reading

Canada’s First Regulatory Sandbox for Fintech? OSC Announces Plans for “OSC LaunchPad” Innovation Hub

Posted in Fintech, Industry News, OSC

OSC chair Maureen Jensen has announced that the OSC plans to launch an innovation hub for fintech entities. “OSC Launchpad” will be the first fintech hub for a Canadian securities regulator.

Securities regulation in Canada impacts a number of fintech business models (including companies offering online advising, peer-to-peer lending, crowdfunding platforms and angel investor organizations). The OSC had also previously issued a notice on peer-to-peer lending, inviting those operating in this sector to discuss with OSC Staff and reminding prospective marketplace lenders that certain prospectus and registration requirements may be applicable to them, depending on their business model.

OSC Launchpad … Continue Reading

OSC Clarifies Regulation of Out of Canada Distributions

Posted in Industry News, OSC, Proposals, Requests for Comment

The Ontario Securities Commission (the “OSC”) is seeking comment on Proposed OSC Rule 72-503 – Distributions Outside of Canada and its related companion policy (the “Proposed Rule”), to eliminate longstanding uncertainty about how outside of Canada distributions of securities will be regulated.

Purpose of the Proposed Rule

A distribution of securities by an issuer to foreign investors may or may not fall under the jurisdictional scope of the Securities Act (Ontario) (the “Act”) depending on the connecting factors to Ontario (e.g. the issuer having an active trading market in Ontario or a head office in Ontario).

In an interpretation note … Continue Reading

Tomorrow, May 18, Registrants Will Receive the OSC’s 2016 Risk Assessment Questionnaire – What Will Your Firm’s Risk Rating Be?

Posted in Exempt Market Dealers, Industry News, Investment Funds, Mutual Funds, OSC, Portfolio Managers, Registrants

For the first time since 2014, the Ontario Securities Commission (OSC) will send Ontario registrants a risk assessment questionnaire (RAQ) that must be completed by portfolio managers, investment fund managers, exempt market dealers, restricted portfolio managers and restricted dealers registered in Ontario. Registrants will receive the 2016 RAQ tomorrow, May 18.

The OSC uses data gathered through the RAQ to apply a risk ranking to firms. Firms with higher risk rankings are more likely to be targeted by the OSC for compliance reviews. As a result, it is important that the RAQ answers be considered … Continue Reading

OSC Sets Out Priorities for 2016-2017

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Enforcement, Exempt Market Dealers, Mutual Funds, OSC, Registrants

The Ontario Securities Commission (OSC) released its draft Statement of Priorities for 2016-2017. The comment period ends May 9th.

Investor Protection Priorities

Advance Best Interest Standard – The OSC will recommend and conduct consultations on regulatory provisions to create a “best interest” standard for advisors. This standard is controversial for some industry participants but the OSC is committed to it. The OSC will also  continue to focus on advisor compensation practices and identify those that are inconsistent with a “best interest” standard.

Compensation Arrangements in Mutual Funds – The OSC will regulate embedded commissions and … Continue Reading

Why Securities Regulators Can’t Collect Monetary Sanctions, and What They Plan To Do About It

Posted in AMF, CSA, Enforcement, IIROC, Litigation, OSC, Uncategorized

Securities regulators across Canada impose significant monetary sanctions against market participants each year. The CSA recently reported that provincial securities regulators collectively imposed $138.3 million in fines and administrative penalties and $111.7 million in restitution, compensation and disgorgement orders in 2015.[1] This was an increase of 102% from the previous year and the highest amount of monetary sanctions imposed since 2009.

At the same time that regulators are imposing increasing monetary sanctions, they are facing an increasing inability to actually collect these sanctions. For example, the British Columbia Securities Commission has collected less than 5% of monetary sanctions imposed … Continue Reading

CSA 2015 Enforcement Report Reveals Increased Regulatory Activity and Significantly Higher Monetary Sanctions

Posted in CSA, Enforcement, IIROC, MFDA, OSC

On February 23, 2016, the Canadian Securities Administrators (CSA) released its annual report on the enforcement activities of its members. Enforcement and pre-enforcement activity has increased significantly in 2015. Monetary sanctions imposed by regulators more than doubled year-over-year and regulators concluded 38% more cases in 2015 even as the number of new proceedings increased slightly.

The 2015 Results

Monetary sanctions doubled: The regulators collectively imposed the highest amount of monetary sanctions on market participants since 2009, the year their investigation into the crash of the asset-backed commercial paper market was settled. In 2015, regulators imposed $138.3 … Continue Reading

Final crowdfunding rules to come into force in five provinces, including Ontario, in January 2016

Posted in AMF, Industry News, OSC

Introduction and Legislative History

After a lengthy review process beginning in 2013, the Ontario Securities Commission (the “OSC”) along with provincial securities regulators from Quebec, Manitoba, Nova Scotia and New Brunswick (with Ontario, the “Participating Jurisdictions”), have finalized amendments introducing a crowdfunding prospectus exemption and a regulatory framework for crowdfunding portals. This new crowdfunding regime (the “45-108 Regime”) will, subject to provincial Ministerial approvals, come into force on January 25, 2016 via Multilateral Instrument 45-108 (“MI 45-108”). For the OSC’s bulletin which includes Multilateral Instrument 45-108, click here. Saskatchewan, which participated in the drafting of MI 45-108, has also … Continue Reading

OSC Proposes Higher Financial Awards for Whistleblowers

Posted in Amendments, Compliance and Supervision, Enforcement, Industry News, OSC, Proposals, Registrants, Requests for Comment, SEC, Uncategorized

The OSC is close to adopting a proposed final version of its previously-announced whistleblowing policy (the Program). The Program would award eligible whistleblowers up to $5 million for reporting serious securities- or derivatives-related misconduct that leads to significant enforcement or settlement outcomes.

We summarized the original OSC consultation paper in a previous article. The OSC received comments on the consultation paper and also hosted a stakeholder roundtable on the proposals. Reporting issuers will want to re-examine their internal compliance and reporting systems, codes of conduct and employment agreements in light of the proposed program. Key features are summarized … Continue Reading

CSA Proposals Require Enhanced Corporate Debt Trade Reporting and Transparency by 2017

Posted in Broker-Dealers, Continuous and Timely Disclosure, CSA, Exempt Market Dealers, IIROC, Industry News, Marketplaces, OSC, Proposals, Requests for Comment

Last week, the Canadian Securities Administrators (CSA) published for comment Proposals that would require trade information for all corporate debt securities executed by dealers to be made publicly available, subject to delayed dissemination and volume caps, by the end of 2017. The CSA Proposals aim to enhance the regulation and transparency of the Canadian fixed income market, partly in response to certain limitations highlighted in a Report on “The Canadian Fixed Income Market 2014” published earlier this year by the Ontario Securities Commission which suggested that retail investors in corporate fixed income securities have less access to … Continue Reading

The OSC Overturns IIROC Panel’s Decision with Harsher Sanctions

Posted in Enforcement, IIROC, OSC

The Ontario Securities Commission (OSC) recently imposed harsher sanctions than were ordered by a panel of Investment Industry Regulatory Organization of Canada (IIROC) following a contested proceeding. The OSC’s decision has important implications in enforcement proceedings before IIROC.

The IIROC Decision (no suspension)

After a contested hearing, an IIROC Panel determined that Lucy Lukic, a registrant at an IIROC member firm, recommended off-the-book investments to her clients.[1] Lukic had recommended securities in an investment fund that was owned and promoted by her husband, a fact that was disclosed to her clients. However, the securities were sold without a prospectus … Continue Reading

New Rules Ease “Canadian Wrapper” Requirements for Private Placements in Canada of Non-Canadian Securities

Posted in Amendments, CSA, Industry News, OSC

Effective September 8, 2015, certain private placements of non-Canadian securities made to Canadian institutional investors that qualify as “permitted clients” will no longer require a “Canadian wrapper”.

Key conditions to new rules

The new rules require that certain conditions be satisfied:

  • the offering must be conducted primarily in a non-Canadian jurisdiction;
  • a concurrent distribution of the securities must be made by the issuer to investors in the U.S.;
  • the securities must either be
    • issued by a non-Canadian issuer that is not a reporting issuer in Canada and has its head office outside Canada and a majority of its executive officers
Continue Reading

Six provinces introduce start-up crowdfunding exemptions for non-reporting issuers, Ontario expects to publish new rule this fall

Posted in Industry News, OSC, Registration

On May 14, 2015, six provincial securities regulators (British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia, and together, the “Participating Jurisdictions”) announced the implementation of substantially harmonized equity crowdfunding exemptions through Multilateral CSA Notice 45-316 – Start-up Crowdfunding Registration and Prospectus Exemptions (the “Notice”). Each Participating Jurisdiction has implemented the rules mentioned in the Notice by publishing a separate instrument, rule or blanket ruling. The new rules permit start-up and early stage companies in the Participating Jurisdictions to raise capital without having to comply with the prospectus requirement (the “Start-up Prospectus Exemption”) … Continue Reading

OSC again uses public interest power to impose penalty where insider trading law technically does not apply – Follow up

Posted in Enforcement, Industry News, OSC

Canadian Lawyer Magazine interviewed us last week on our recent post “OSC again uses public interest power to impose penalty where insider trading law technically does not apply”.

The Canadian Lawyer Magazine article is available online here: “OSC plays public interest card where insider trading didn’t apply”.… Continue Reading

New OSC Fee Rules Come into Effect April 6

Posted in Amendments, Compliance and Supervision, Industry News, OSC, Registrants

Effective April 6, the OSC is implementing amendments to OSC Rule 13-502 – Fees (the “New Rule”). While largely consistent with the basic framework under the previous version of the fee rule (the “Old Rule”), the New Rule changes the basis for the calculation of participation fees by removing the use of a “reference fiscal year”, introduces nominal increases to certain activity fees, and introduces new management certification requirements for participation fee forms.

Participation Fees

The two main types of fees charged under the Old Rule are participation fees and activity fees. Participation fees are set … Continue Reading

OSC again uses public interest power to impose penalty where insider trading law technically does not apply

Posted in Enforcement, OSC

Yesterday, the OSC approved a settlement agreement between OSC Staff and Anand Hariharan in a case involving allegations of tipping, insider trading and conduct contrary to the public interest. Hariharan agreed to a reprimand and significant restrictions on trading for 10 years. The settlement also envisages a disgorgement of profits but, surprisingly, only a portion of them.

Hariharan learned from a friend that a subsidiary of Loral Space & Communications Inc. (“Loral”) was going to be acquired by another company (“MDA”). Hariharan’s friend was an MDA employee and the acquisition was a material fact to both Loral and to MDA. … Continue Reading

Mutual Fund Compensation and Reinvestment Practices Face OSC Scrutiny

Posted in Compliance and Supervision, Continuous and Timely Disclosure, Investment Funds, Mutual Funds, OSC, Portfolio Managers

The OSC recently published its 2014 Summary Report for Investment Fund and Structured Product Issuers which includes, among other topics, a summary of key OSC policy initiatives affecting investment fund issuers and highlights of 2014 continuous disclosure and compliance reviews of investment funds The report also sets out OSC Staff observations on key emerging issues and trends for mutual funds.

OSC criticizes reinvestment of distributions by “default”

Some mutual funds offer a choice between making distributions to investors in cash, or in the form of reinvested units. OSC Staff is concerned about mutual funds that set the payment of distributions … Continue Reading

OSC accepts circumstantial evidence of tipping and insider trading in important new decision

Posted in Enforcement, Industry News, OSC

In the recent Azeff[1] decision which followed a contested hearing, the Ontario Securities Commission (OSC) accepted several insider tipping and trading allegations based on “firmly established” circumstantial evidence against an M&A lawyer and four registrants. Cases based on circumstantial evidence have been successfully contested by respondents in other cases in Canada.[2]

Summary of Facts

OSC Staff alleged that, in connection with six separate M&A transactions between 2004 to 2007, a lawyer (Finkelstein) tipped his friend (Azeff), an investment adviser, and that four investment advisers (Azeff and his partner Bobrow, Miller and his associate Cheng) engaged in insider trading … Continue Reading