Annual report from OSC compliance branch signals exam targets for the year ahead
With the final tranche of the client-focused reforms (CFRs) taking effect at the end of this year, industry firms can expect regulators to start examining for compliance with the new requirements in the months ahead.
In a report published today by its compliance and registrant regulation branch, the Ontario Securities Commission (OSC) outlined its compliance review priorities for the upcoming year, which include a focus on the implementation of the CFRs.
“The [Canadian Securities Administrators (CSA)] is committed to ensuring these reforms are effective,” the report said.
The first phase of the reforms are already in force — that began June 30 — and the remaining measures will be adopted Dec. 31.
“Compliance review programs and processes in the CSA jurisdictions will reflect the new requirements for registrants as soon as the CFRs come into effect,” the report noted.
Yet, as the regulators test for compliance with the new requirements, they also acknowledge that “some implementation issues may take longer to resolve.” The report said that, as a result, regulators “will look at the demonstrated good faith efforts registrants make to comply with these new requirements.”
Alongside CFR compliance, the OSC’s report indicated that its other priorities for the year ahead include reviewing the activities of firms offering online advice or trading, as well as looking at firms that were identified as high-risk in the regulator’s last risk assessment survey, and at those registering crypto-trading platforms.
The process of bringing crypto-trading firms into the regulated world began in earnest earlier this year, after regulators published new guidance and issued a warning to crypto firms to begin the process of seeking registration if they didn’t want to face enforcement action.
Several pending enforcement cases have been brought as result of that warning.
In the new report, the OSC said, “We are working to implement an efficient process to onboard these firms and will be transparent with them regarding our progress.”
In addition to signalling future priorities, the OSC’s report also detailed the results of recent compliance efforts, including reviews of the marketing practices of fund managers, portfolio managers and exempt-market dealers.
Among other things, these reviews examined for possible greenwashing risks at firms that offered “responsible investing” products or services. The report noted that the OSC “did not identify any substantive concerns specific to this area of the marketing review.”
Areas that did raise concerns included inadequate disclosure when using benchmarks, misleading marketing material, and instances where firms made prohibited representations in their marketing.
A joint review that was conducted alongside the self-regulatory organizations and which examined firms’ complaint-handling processes in 2020 also uncovered several issues. Those included firms failing to clearly tell clients about their right to take complaints to the Ombudsman for Banking Services and Investments.
“We will continue to monitor firms’ complaint handling practices as part of our compliance reviews to verify that the complaint handling and escalation processes are presented in a manner that are clear, fair and not misleading to clients,” the report said.
Source: INVESTMENT EXECUTIVE