Opinion: Investor protection is the OSC’s best competitiveness strategy

This binary framing is out of date. At this stage of market evolution, robust investor protection is not a drag on competitiveness — it is the most effective competitiveness strategy the OSC has at its disposal.

This is not theoretical. When the U.K. introduced the Retail Distribution Review in 2013 — requiring advisor qualifications, banning commissions and mandating clear fee disclosure — industry predicted an exodus of firms and investors. The opposite occurred. Assets under advice grew, the number of regulated firms stabilized after an initial shakeout and international rankings of London’s competitiveness improved.

If the OSC wants Ontario to be a jurisdiction of choice for listings, asset management and innovation, its best lever is to demonstrate — through its priorities, tools and day-to-day practice — that investors are treated fairly, complaints are handled credibly and bad actors face visible consequences.

In that spirit, the current Statement of Priorities consultation is an opportunity to move beyond the old protection-versus-growth trade-off and demonstrate how a small number of cross-cutting investor-facing priorities can simultaneously strengthen confidence in Ontario’s markets; improve the OSC’s operational effectiveness; and reduce the regulatory burden on compliant firms by tackling problems earlier and more systematically.

Three priorities would demonstrate this in practice.

1. Treat complaint resolution as core market infrastructure

Goal 2 of the draft Statement of Priorities commits to finalizing a framework for an independent dispute-resolution service with binding compensation decisions in investment cases, and to operationalizing the new disgorgement regime.

These are welcome and overdue steps. But after more than a decade of discussion, it would be a missed opportunity if the final Statement of Priorities did not treat complaint handling as a central piece of market infrastructure — with clear expectations about what will be delivered in 2026–27.

A modern redress framework does more than mop up harm after the fact. Properly designed, it supports three business-like disciplines that any well-run firm would recognize:

• Problem identification. A credible, accessible complaints channel is often the earliest signal that something is wrong — with a product, a distribution model or a sales practice. When the U.K.’s Financial Conduct Authority began publishing firm-level complaint data in 2012, patterns emerged within months: certain investment products generated complaints at 15 times the industry average, and specific firms showed persistent failure modes invisible to traditional supervision. The data didn’t just help investors choose better firms — it gave the regulator a heat map for targeting examinations and policy interventions.
• Continuous improvement. Complaints, when analyzed systematically, point to recurring failure modes that can be addressed through guidance, supervision, targeted exams or, where needed, rule changes.
• Proof of concept. If reforms are working, that should show up in the pattern and severity of complaints over time. If they are not, complaint data will usually be the first place the gap becomes visible.

For the OSC, this means treating complaint data from the Ombudsman for Banking Services and Investments and the OSC’s own enforcement and inquiries data as a strategic asset — not an after-the-fact remedy.

A binding dispute-resolution framework, backed by a robust disgorgement regime, can both improve direct outcomes for harmed investors and provide the evidence base for more targeted, risk-based regulation. That is good for trust, good for market quality and ultimately good for serious firms that do not want to compete with weak practices and repeat offenders.

2. Build a modern supervisory backbone

The Statement of Priorities calls for leveraging AI, improving data capabilities and using horizon-scanning to anticipate emerging risks. These are promising signals, but they will deliver limited value if they remain scattered across separate projects.

The next 12–24 months are the right time for the OSC to move toward a more integrated supervisory technology (suptech) and regulatory technology (regtech) backbone that supports smarter triage and handling of complaints and tips; more consistent, data-driven oversight of high-risk products, business models and sales practices; and more efficient interactions with registrants, by reducing duplicative data requests and manual reporting.

This is not about technology for its own sake. It is about importing disciplines that any modern financial firm would recognize using data and analytics to identify outliers, to test whether controls are working and to focus resources where they matter most.

If done well, this kind of suptech/regtech investment can do three things at once:

• Improve investor outcomes by spotting patterns of misselling, fraud or operational weakness earlier.
• Support capital formation by giving investors and issuers more confidence that the playing field is reasonably level.
• Reduce burden on compliant firms by focusing regulatory attention on behaviour that creates risk, rather than on box-ticking.

In other words, a more modern, data-driven OSC is not an added layer of compliance — it is a smarter layer of compliance that aligns with how sophisticated market participants already run their businesses.

3. Make support for vulnerable cohorts a competitiveness issue

The Strategic Plan and Statement of Priorities both recognize the needs of older and vulnerable investors, and the latter’s ongoing initiatives section refers to work on these groups. That is a start.

But in an environment of rising financial fraud, complex products and aggressive online promotion, vulnerable cohorts are no longer a niche concern. They are a bellwether for the health of the entire retail market.

Some might argue that sophisticated institutional investors — not vulnerable retail cohorts — are the real bellwether for market health, since they drive capital allocation decisions. But this misses the point. Institutional investors don’t operate in isolation from retail market quality. When pension funds and endowments assess whether to allocate to Ontario-based managers or list on Ontario exchanges, they look at the entire ecosystem. A market that tolerates systematic exploitation of its least sophisticated participants signals weak supervision, captured regulators and elevated reputational risk. That’s precisely the environment sophisticated capital avoids.

When fraud and miselling are concentrated in communities with less financial resilience, the immediate human cost is obvious. The less visible effect is that trust erodes more broadly: families become wary of all financial products; legitimate advice is harder to distinguish from scams; and the reputational damage spreads far beyond the original misconduct.

From a competitiveness perspective, this is self-defeating. A market that cannot demonstrate basic protections for seniors, new Canadians, lower-income households and inexperienced investors will struggle, no matter how many new exemptions or listing incentives it offers.

The OSC should elevate protection of vulnerable cohorts as a cross-cutting priority in the final Statement of Priorities and link it explicitly to: strengthened complaint handling and redress; targeted supervision of high-risk products and distribution models; and public-facing communication that makes it easier for investors to distinguish registered, regulated firms from unregulated or offshore promoters.

Doing so would signal to both government and market participants that protecting vulnerable investors is not a concession to advocates — it is a precondition for sustainable capital formation.

Investor protection and competitiveness are not rivals

Running through the draft Statement of Priorities is a strong emphasis on capital formation, competitiveness, “right-sizing” regulation and reducing interprovincial barriers. None of that is objectionable. The risk arises when those priorities are pursued as stand-alone goals, decoupled from investor outcomes.

Experience in multiple jurisdictions suggests that when burden reduction becomes an end in itself, the likely byproducts are: weaker gatekeeping; more room for marginal products and intermediaries; and a slower and less credible response when things go wrong.

In the short term, this may feel like a win for industry. Over time, however, it raises the cost of capital, drives away long-term investors and forces regulators to intervene more aggressively when failures accumulate. The very goals of fair, efficient and competitive capital markets — and confidence in those markets — are undermined.

By contrast, a Statement of Priorities that: highlights a small number of investor-facing, system-level initiatives (such as complaint handling, suptech/regtech and protection of vulnerable cohorts); explains how each will support both investor outcomes and capital formation; and describes in plain language what stakeholders can expect to see over the next 12 months would give the OSC a stronger story to tell — to investors, industry and government.

It would also align the Statement of Priorities more closely with the OSC’s own Strategic Plan vision of Ontario’s markets as “inviting, thriving and secure.” Those three adjectives are not achieved by loosening rules and hoping for the best. They are achieved by demonstrating, year after year, that this is a jurisdiction where investors are treated fairly, problems are surfaced and addressed, and innovation is welcomed within a framework that people can trust.

That is why investor protection is not a competing pillar of the OSC’s mandate. It is the foundation on which the OSC’s competitiveness ambitions will stand or fall.

Ken Kivenko is president of Kenmar Associates, a privately-funded organization focused on investor education. Harvey Naglie is a consumer advocate and policy analyst focused on financial regulation.