Ontario Ministry of Finance Capital Markets Modernization Taskforce: Consultation Report

septembre 7, 2020

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Ontario Ministry of Finance Capital Markets Modernization Taskforce: Consultation Report 

Letter Summary:

The taskforce was formed in February and reports directly to the Minister of Finance. It prepared a consultation report highlighting 47 high impact policy proposals and seeks feedback prior to providing the Minister with its final list of recommendations. The proposals are wide ranging, and includes topics such as governance of the OSC, improving regulatory structure, reducing duplicative regulatory burden, enhancing competition for smaller players and improving investor protection. Among the proposals are suggestions to separate the regulatory and adjudicative functions at the OSC, move to a single SRO, streamline continuous disclosure requirements and make it easier to raise capital through additional prospectus exemptions and relaxed restrictions on EMDs. Several proposals relate to the proxy voting system, including the addition of proxy advisory firm regulation and rules to prevent over-voting, as well as suggestions to increase OSC enforcement powers and give OBSI authority to issue binding decisions. Other proposals relate to fostering innovation, such as the creation of a regulatory sandbox involving both the OSC LaunchPad and FSRA

Overview of the Council’s Comments:

The CAC of CFA Societies Canada submitted an extensive response to the 47 specific initial recommendations of the Taskforce and look forward to continued engagement with the Taskforce and the Ministry of Finance as they move toward final recommendations. In our initial consultation response and our comment letter in response to the report, we were generally supportive of sensible easing of regulation for certain registrants, seeking to focus regulatory attention on those business models and registrants that pose a higher risk, while easing burden for those where lesser risk exists. 

o We encouraged the Taskforce both in general and with specific suggestions to further cultivate Ontario as an attractive environment for investment funds and their managers. 

o We also encouraged the Taskforce to further cultivate investor protection through specific policy action on pervasive issues such as persistent conflicts of interest, the need for protection of vulnerable and older investors, and to strengthen investor supports such as OBSI and the enforcement function at the OSC.

With respect to a number of the Taskforce’s specific recommendations, we were cautiously supportive of expanding the OSC’s mandate, generally in favor of those recommendations that would generate regulatory efficiency such as through a merger of the MFDA and IIROC, and supportive of modernizing rules and regulatory infrastructure, such as by fast-tracking SEDAR+. We were also very much in favour of the Taskforce’s proposals on additional sustainability disclosures, and in their recommendations to foster further diversity in our capital markets ecosystem. 

We were not in favour of recommendations that we thought would degrade the quality of financial information available to investors, such as the proposal to consider less frequent issuer reporting. We were also strongly not in favour of a number of proposals that in isolation or particularly in aggregate would degrade the powers of shareholders in holding issuer boards and management accountable. This was highlighted by our strong opposition to the Taskforce’s proposal for the regulation of proxy advisors, which we believe was unwarranted, unsupported by data, and could set a concerning precedent for analyst independence.