The Financial Services Commission of Ontario (FSCO) should be merged with the Deposit Insurance Corporation of Ontario (DICO) into a single regulatory agency, with an independent tribunal, according to a government review panel.

The expert advisory panel charged with reviewing the mandates of FSCO and DICO released its preliminary report on Wednesday.

The panel recommends that the Ontario government replace the two regulatory bodies with a single integrated organization, a new Financial Services Regulatory Authority (FSRA), to provide both prudential and market conduct regulation for provincially regulated financial firms. A Superintendent of Pensions would oversee a distinct pension division.

“In short, we think Ontario needs a restructured regulator to protect the integrity of its financial services marketplace amid rapid changes to industry structure, technology, market demands, and consumer expectations,” the preliminary report says. “This new regulator should have an expert board of directors, a new executive structure, an identifiable consumer protection orientation, adequate resources, greater agility and accountability.”

In particular, the proposed FSRA should have its own corporate identity that is operationally distinct from the government, the preliminary report says. It recommends that the agency should be self-funded, organized at arm’s length from the government, and authorized to make and enforce its own rules. The organization also needs a clearly articulated statutory mandate, and should be governed by an expert board, the report says.

The preliminary report of three-member panel, whose members are Larry Ritchie, former vice chairman of the Ontario Securities Commission (OSC), former personal finance journalist James Daw, and George Cooke, a former regulator and insurance company executive, also proposes that the Financial Services Tribunal (FST) should be operationally and financially independent of the proposed FSRA.

The recommendations aim to address concerns that the panel heard during its consultations, the report says, including that: FSCO lacks the resources, governance, and accountability, to effectively fulfill its current mandates; it lacks transparency; and its approach isn’t consistent with other regulators. “The credibility of the regulatory regime is undermined by the perception that FSCO is unable or unwilling to undertake effective enforcement,” the preliminary report says.

The panel also heard concerns about the independence and resources of the FST and similar fundamental worries about the role of DICO.

The preliminary report makes 37 specific recommendations intended to help implement the panel’s vision, but stresses that the proposed structural recommendations, along with changes to governance, accountability, should be adopted first, with the rest of the changes to come after these reforms are adopted.

The panel is seeking feedback on its preliminary recommendations by Dec. 14, and expects to deliver its final recommendations to the Minister of Finance by “early winter”.