Have a RegTech solution for Ontario’s capital markets that you’re trying to get off the ground? OSC TestLab can help. Learn more and apply to our first themed test by January 31

Advisers, dealers, and their representatives (registrants) can benefit from innovative solutions that help them better understand their clients, make product information more accessible and make better recommendations for their clients.

OSC TestLab Invitation

Solution Providers

OSC TestLab’s first theme is focused on testing innovative solutions that can help registrants better understand their clients and products and contribute to better client outcomes.

Are you a technology provider or registrant with a solution that addresses one or more of the problem statements set out below? If so, then OSC TestLab invites you to apply to test your solution as part of our first test expected to start in Spring 2022.

MAKING PRODUCT INFORMATION MORE ACCESSIBLE

How can technology or other innovative solutions help registrants more effectively share, collect, assess, and compare current product information and provide this information to their clients?

Why is this important

What we’ve heard:
  • Registrants must understand the structure and features of each product they recommend, have processes to review and approve new products, and review changes to existing products (KYP obligations).
  • We have heard from registrants that it is difficult to identify, understand and compare the different products that are available without having the benefit of technology that can help gather this information in an easily accessible format.
  • We have also heard that there is a lack of information around products and poor standardization of related documents and data in the exempt/private market.
  • Some investors also indicated that it would improve their investor experience and help them make investment decisions if there was greater access to product information, and transparency around product categories and alternative products.

Examples of solutions that can be included

Solutions that could address this problem statement include ones that:
  • Aggregate product-level information (e.g., fees, structure, risks, returns, etc.) about issuers (e.g., public and private companies, investment funds, etc.) in a standardized format to help registrants consider a reasonable range of product alternatives before making recommendations to clients.
  • Monitor significant changes to product information and inform registrants of changes that may impact their assessment of the products offered to clients.
  • Automate the review of issuer disclosure documents and use technology that assists with determining the risk profile of a product.
  • Help capital market participants, including registrants, work together to share information and/or develop standards and best practices for sharing information.

IMPROVING INFORMATION SHARING AND ENHANCING CLIENT INTERACTIONS

How can technology or other innovative solutions help registrants collect and assess client information to better understand and respond to their clients’ investment needs, and improve their communications with their clients?

Why is this important

What we’ve heard:
  • Registrants must ensure that they have sufficient information about a client’s personal and financial circumstances, investment needs and objectives, investment knowledge, and risk profile to be able to make suitable investment recommendations that are in their best interests.
  • We have heard that registrants have difficulty getting in touch with investors to obtain updated information to reflect changes in their personal or financial circumstances.
  • Most investors agreed that the use of technology/automation by advisers and dealers could provide a better investor experience (e.g., save time, improve engagement, facilitate informed investment decisions, determine if they are on track with their investment goals/objectives).
  • Investors also believe that it would improve their experience if they received insights on their portfolio directly from their dealers and advisers and had access to tools and educational resources that would help them understand investments and the investment process.
  • Investors that use online platforms and make investment decisions and trades on their own indicated that they would benefit from additional tools that could help them independently research and analyze stocks and investment options.

Examples of solutions that can be included

Solutions that could address this problem statement include ones that:
  • Enable registrants to collect, assess and maintain an investor’s personal information and investment profile on an on-going basis, accurately and efficiently.
  • Automate and/or enhance the collection and assessment of investor information, including obtaining information from other sources with the investor’s consent and opt-in.
  • Employ alternative ways to obtain and review information without having to prompt investors to confirm or provide updates to all information.
  • Provide access to tailored educational platforms that can be integrated with a registrant’s offerings.
  • Allow investors to better complete, update and manage their personal and financial profiles.
  • Enable information sharing, including the ability for investors to share information with other organizations such as government entities or other financial service providers.
  • Incorporate new ways to assess information, such as behavioral insights to understand risk tolerance and risk profiling methods.
  • Allow registrants to share information, document discussions and interact with clients in a new way.

How did we arrive at these problem statements?

Know-your-client (KYC), know-your-product (KYP) and suitability obligations are among the most fundamental obligations owed by registrants to their clients. However, this is also an area where registrants have experienced compliance challenges. These challenges highlighted an opportunity for improvement.

Recent amendments to these obligations arising from the Client Focused Reforms (CFRs) are coming into force at the end of this year. These amendments update registrant conduct requirements to better align the interests of registrants with the interests of their clients, improve outcomes for clients, and clarify the nature and terms of their relationship with clients.

As a result of these amendments, registrants may be required to update their policies and procedures, including those related to collecting and documenting client information and making investment recommendations. These developments suggested the timing was right for market participants to consider new solutions and alternative approaches to meet these obligations and evolve their processes.

We see an opportunity for innovative solutions to enhance registrant-client relationships to be more interactive and tailored to individual client needs and interests. The use of technology also has the potential to make compliance in these areas more efficient and effective, and to reduce costs. But, for these benefits to be realized, new solutions need to be implemented.

We listened to your feedback

We see an opportunity for innovative solutions to enhance registrant-client relationships to be more interactive and tailored to individual client needs and interests. The use of technology also has the potential to make compliance in these areas more efficient and effective, and to reduce costs. But, for these benefits to be realized, new solutions need to be implemented.

Through OSC LaunchPad, we learned that technology providers are finding it difficult to engage with registrants to test their solutions, in part, because registrants may be reluctant to try new technologies without the involvement and guidance of the OSC. This highlighted the potential for OSC TestLab to help.

To further develop this theme into problem statements for solution-focused testing, we obtained input from stakeholders through a feedback survey earlier this year. In total, 128 registrants, 8 technology providers and 256 individual investors responded and provided feedback on the challenges they see around registrant-client interactions and related regulatory requirements.

While the survey responses are not representative of all potential views, the survey did provide a window into how certain market participants are viewing these issues and highlighted opportunities for the development of innovative solutions that can improve current processes.

A majority of the registrants who responded believe that technology can help them improve processes in a number of areas. Similarly, investors were generally of the view that the adoption of technology by their dealers and advisers could provide a better overall experience and improve outcomes.

The feedback indicated registrants’ top priorities as:

  • Obtaining and retaining clients.
  • Compliance with Client Focused Reforms.
  • Automating compliance functions.

Application eligibility criteria

You should submit an OSC TestLab application if:

  • You have reviewed the OSC TestLab problem statement(s) and have an innovative product, service or other solution that responds to the problem statement(s).
  • Your solution is new or significantly different than existing solutions.
  • Your solution provides an identifiable benefit to Ontario’s capital markets, its participants, or investors.
  • Your innovative product, service or other solution will be ready to be tested by March 31, 2022 in a live environment, and you have users in Ontario committed to testing.
  • You have a testing plan, including an exit plan/strategy developed with clear objectives, parameters, and success criteria.
  • You have allocated the appropriate financial and human resources to participate in the testing process, including responding to requests from the Innovation Office within reasonable timelines.
  • You are prepared to comply with terms for participation in OSC TestLab including any regulatory relief offered to facilitate testing, as applicable.

How to apply

Applicants wishing to participate in the OSC TestLab must complete and submit the online OSC TestLab Application form. We strongly recommend that you download and review the complete Application Guide.

Your Application requires a testing plan to be provided, as an attachment to the online form.

Please ensure that you download and complete the test plan prior to submitting the Application.

To be considered for this cohort of the OSC TestLab, submit your application before January 31st, 2022.

Ready to test your solution?

Applications are now open.

We’re here to help

If you would like to be notified about OSC TestLab updates or know more about the upcoming test, please drop us a line at testlab@osc.gov.on.ca

Source: OSC

Close Menu