As capital markets become increasingly complex and interconnected, the Ontario Securities Commission (OSC) is taking a more forward-looking, fact-based and analytical approach to providing investor protection. That said, it’s in the best interest of everyone – including regulators, investment dealers and financial advisors – that we seize every opportunity to enhance the trust and confidence of investors that is so fundamental to the health of our capital markets. That’s because many Canadian investors are on the sidelines, and we all can play a role in restoring their confidence to invest.

The question, of course, is: how? The OSC is open to solutions and approaches that better address regulatory concerns and, where appropriate, align the interests of the industry and investors. For example, our approach to investor protection is increasingly based on consultation and facts. With better knowledge of what investors need, what is working for them now and what balance of regulation and education is most likely to work in the future, we can foster the confidence that is the lifeblood of the markets and the overall economy.

The Office of the Investor (OI) serves a central function in helping the OSC fulfil its mandate to provide protection for investors while fostering fair and efficient capital markets. We are gathering perspectives and information from many sources, including the OSC’s investor advisory panel and Investor Education Fund, as well as academics, institutions, investor advocates and other regulators – and we are listening to what investors say about issues that are important to them.

Since the OI was created, we’ve heard the concerns, inquiries and useful ideas of many investors. We want to hear more.

This knowledge is used internally to inform other OSC branches about what investors want, how they invest and how their behaviour should be reflected in OSC policies and actions. The OI is both the aggregator of facts about investors and the advocate on behalf of investors within the OSC.

The OI uses facts and research to identify key concerns of investors, then develops proposals for the most effective forms of protection and advocates for them within the OSC. The OI’s approach is based on the belief that all market participants have a vested interest in investor protection, and that there are many ways to achieve it. Effective and open communication among stakeholders increases the OI’s understanding of differing viewpoints and helps align them to create a stronger regulatory environment.

The OI is focused on some of the significant issues that have been raised by investors that may affect financial advisors. Clients want information about the costs and performance of their investments. The OI believes advisors should be providing this and the Canadian Securities Administrators (CSA) has proposed enhancements to disclosure requirements regarding investment costs and performance.

In addition, the OI knows that investors have limited understanding of the various mutual fund fees and how advisors can get paid. The CSA is reviewing mutual fund fees and recently published a discussion paper for comment about the appropriate fee structure for Canada.

The CSA also is exploring the potential benefits and competing considerations regarding the introduction of a statutory fiduciary standard for advisors and dealers when they advise retail clients, and comments on its consultation paper are welcome.

It’s important that the CSA hears balanced feedback, from industry and investors, on both the “best interest” standard consultation paper and the mutual fund fees discussion paper.

Dispute resolution is another area of concern. Investors want enhanced clarity regarding the service provider and how any complaints will be handled. While most clients think that their advisor must act in their best interest, there also needs to be more clarity around the client/advisor relationship. Would there be fewer disputes to resolve if clients and their advisors had a better understanding of each other’s roles and responsibilities? It seems likely.

The enhanced disclosure through Fund Facts is a good example of a tailored, effective approach by regulators to improve sales disclosure practices for Canadians. Disclosure in a fund prospectus is available for those investors who want it, while a simple, readable Fund Facts document also is available to the many more who don’t. In either case, clients can make informed investment decisions. That benefits everyone. The CSA developed Fund Facts by understanding actual investor behaviour and concerns, developing and testing documents to meet those concerns and sustaining a productive dialogue among everyone involved to achieve a solution that works. The data show Fund Facts work.

The OI is looking beyond traditional approaches based on rules and disclosure and is exploring other ways to address the concerns and issues of investors. Using consultation, research and evidence-based advocacy, we serve as a credible voice for investors within the OSC to support its work to deliver strong investor protection and foster investor confidence in our capital markets.IE

Eleanor Farrell is director of the Ontario Securities Commission’s Office of the Investor (OI). The OI can be reached at

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