The launch of the Financial Services Regulatory Authority (FSRA) marks the dawn of a new era for financial services regulation in Ontario. The debut of the newly established regulatory agency, which assumed the duties of the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO) on June 8, presents a meaningful opportunity to bolster consumer protection in the province through a fresh new regulatory approach.
The launch of the FSRA is a long-awaited, welcome change for Ontarians. The government announced the creation of the new regulator in part as a result of numerous problems with the previous regulator, FSCO, identified by the auditor general in 2014. These included oversight deficiencies, slow investigations, weak enforcement action and a lack of information-sharing mechanisms with other regulators. Considering FSCO’s stated mandate of providing protection of the public interest and enhancing public confidence in the sectors it regulated, such deficiencies were alarming to Ontarians.
A subsequently established expert advisory panel recommended a full overhaul of Ontario’s financial services regulatory framework, including the establishment of the FSRA.
The FSRA has a substantially broader mandate than FSCO. Not only does it integrate the responsibilities of both FSCO and DICO, but it also will be responsible for establishing and enforcing regulations under the Financial Professionals Title Protection Act, 2019, passed by the Ontario government in May of this year. This responsibility is a first in Canada, as restricting the use of financial planner and financial advisor titles to people who have earned a professional certification is entirely new — but welcome and long-overdue — territory.
The FSRA will face a difficult task in drafting meaningful rules that reduce consumer confusion regarding who is qualified as a financial advisor or a financial planner. While this will be challenging, the FSRA has an opportunity to make significant strides in improving consumer protection and mitigating consumer confusion regarding the critical services of financial planning and advice. With these rules, the FSRA will also set an example that is likely to influence policy in jurisdictions across the country.
The FSRA has indicated that collaboration will be a key element of its regulatory approach. On files such as title protection, it will be critical to leverage the knowledge and expertise of stakeholders. Taking the time to consult with stakeholders to fully understand the landscape of credentials, professional bodies and existing standards will enable the FSRA to establish appropriate and effective rules.
The Ontario government describes the FSRA as modern and innovative – essential qualities in today’s world, where advancements in technology and changes in the way consumers do business are forcing the financial services industry to evolve and adapt at a rapid pace. Regulators must keep up, and a responsive approach to regulation will help the FSRA ensure its rules will remain relevant as the industry evolves.
The FSRA has stated publicly that it will take a principles-based approach to regulation, enabling industry players to chart their own path as long as they achieve the desired regulatory outcomes. This is encouraging, particularly when it comes to the criteria the FSRA will be setting for approved certification bodies under the Financial Professionals Title Protection Act. Establishing principles rather than prescriptive rules will ensure that generally accepted principles of certification can be upheld by bodies that understand certification, allowing the regulator to leverage the foundation and expertise professional certification bodies have already built, and enabling the application of the legislation nimbly and efficiently.
The FSRA’s regulatory approach complements the Ontario Securities Commission’s (OSC) key priorities of reducing the regulatory burden and implementing client-focused reforms – goals that aim to streamline regulations and enhance client outcomes. Together, both regulators’ efforts in these areas will pave the way for an environment in which consumers are adequately protected, where the existing expertise of professional certification bodies is respected and leveraged, and where the best interest of consumers is truly achieved.
This new era of financial services regulation in Ontario is promising. With consumers’ interests at the heart of this new regulatory framework, and a willingness among regulators to evolve, adapt and innovate, Ontario is setting an example that other jurisdictions would be wise to follow.