On November 14, 2016, Ontario Finance Minister Charles Sousa released Ontario's fiscal update, (the "Review") which contained details of the province's intention to create a new provincial Financial Services Regulatory Authority ("FSRA"). This announcement is part of the government's goal of enhancing financial protection for consumers and modernizing the regulation of pensions and financial services.
The government revealed that the FSRA will be an agency of the crown, whose object will be "to regulate the regulated sectors"1. The FSRA's membership will consist of a board of directors and it will be responsible for oversight of insurance companies and intermediaries, pension plans, loan and trust companies, credit unions, mortgages brokerages and co-operatives. It will include the creation of an Office of the Consumer, whose mandate will be to "ensure individuals' perspectives are considered”.
The first step in the creation of the FSRA occurred November 16, 2016, with the introduction to the legislature of Bill 70 — Building Ontario Up for Everyone Act (Budget Measures), 2016, ("Bill 70") which passed its first reading.
Bill 70 requires the provision of information by the Financial Services Commission of Ontario ("FSCO"), the Financial Services Tribunal ("FST") and the Deposit Insurance Corporation of Ontario ("DICO") to the Authority "for the purpose of preparing for the Authority to carry out the regulatory function" and for the transition from FSCO, the Superintendent of Financial Services and DICO to the Authority.
The government states that its actions are intended to increase consumer confidence in the province's financial sector and ensure investor and pension-plan beneficiaries are adequately protected. The Minister will provide further details of how this transition of authority to the FSRA will occur and is preparing to draft a detailed implementation plan following the passing of the enabling legislation.
The creation of the FSRA follows the spirit of recommendations made in the Ontario Auditor General's report of December 2014. After conducting an in-depth audit of FSCO, the report suggested FSCO consider ways to transfer responsibility for protecting the public interest to another body and divest itself of responsibility for overseeing regulated financial sectors, including insurance companies.
The Review also reflects recommendations made in a preliminary position paper (the "Position Paper") issued in November, 2015 by an expert advisory panel on financial regulation, assembled by the Ontario Ministry of Finance. The government had grown concerned over what Mr. Sousa deemed to be "a lack of appropriate governance and accountability" in the current regulatory scheme. The Position Paper was based on an in-depth review of the mandates of FSCO, FST and DICO. It contained recommendations related to mandate, governance, structure, tools and regulatory approach, including the establishment of the FSRA.
Minister Sousa's announcement on November 14 was silent on specifics about changes to the current approach to licensing and regulation of insurance intermediaries. FSCO currently licenses and regulates life insurance and property and casualty insurance agents, while property and casualty insurance brokers are regulated by the Registered Insurance Brokers of Ontario ("RIBO").
Continuing to build off of recommendations included in the Position Paper, the Review acknowledged in Ontario the absence of a "general framework" that "exists to regulate the activities of individuals who offer financial planning and financial advisory services". An independent committee of experts (the "Committee") has been appointed to review the licensing and regulation of these services.
The Committee issued a draft report on April 5, 2016 (the "Draft Report") and a final report is scheduled for release in early 2017. Integral to the recommendations outlined in the Draft Report was the establishment of the FSRA, which would have "flexibility and comprehensive authority over market conduct regulation in certain sectors". Key recommendations in the draft report include the regulation of financial planning in Ontario, harmonization of regulatory standards, the use of titles to reduce consumer confusion and a comprehensive central registry to provide consumers with information regarding the licensing and registration status of individuals and firms who engage in financial planning and advisory services.
All of these independent reviews and reports foreshadow major changes in the regulation of pensions and financial services in Ontario, the most significant of which would be the creation of the FSRA. The FSRA would act as a single regulatory authority with oversight over the provincial financial services industry, including the licensing and regulation of life and property and casualty insurance agents, and financial planners and advisors. Such a scenario would arguably support a level playing field between intermediaries selling similar financial products, an outcome that was emphasized as desirable in the Position Paper.
A full version of the "2016 Ontario Economic Outlook and Fiscal Review" can be found online. A full version of Bill 70, "Building Ontario Up for Everyone Act (Budget Measures), 2016" subtitled "An Act to implement Budget measures and to enact and amend various statutes" can be found at online.
1 As defined in the Financial Services Commission of Ontario Act, 1997, S. 3.