The Ontario Securities Commission has published an application from the mutual fund processing service, FundSERV Inc., for recognition as a clearing agency.
The OSC indicates in its notice that, subject to the comments it receives on the application, its staff will recommend that the commission grant the firm a recognition order with terms and conditions in a variety of areas, including: governance, fees, access, rulemaking, due process, risk management, systems and technology, financial viability and reporting, outsourcing, and information sharing and regulatory reporting.
The notice indicates that FundSERV provides limited clearing agency functions, which do not involve many features of traditional clearing agencies and central counterparties, such as credit enhancement, the assumption of counterparty risk, netting, novation or custody. “Consequently, the limited clearing agency functions pose little systemic risk,” it says.
A draft recognition order was also published today spelling out the proposed terms and conditions for FundSERV’s recognition. The OSC notice says that the draft order is tailored to FundSERV’s circumstances, and imposes requirements that are proportional to the level of risk and the level of activities engaged in by FundSERV.
The commission is seeking comment on all aspects of the application and the draft order by April 1.