The 2018 Ontario budget offers enough information on financial industry reform to pique interest, but not enough to shed light on future regulatory processes.

The budget includes a note on the Liberal government’s plan to develop a framework for financial planners, but it offers scant detail on how that will occur. The government says it’s still committed to restricting titles and to closing “the gap that currently allows financial planners to perform their work without regulatory oversight or specified proficiency requirements,” but the budget doesn’t provide an implementation plan.

The Finance Department released a consultation document on the regulation of titles and advice earlier this month, for which the comment period ends Apr. 16.

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The most prescriptive item in the budget, for the advice industry, is the government’s update on its creation of the Financial Services Regulatory Authority of Ontario, or FSRA. This new body, which is set to replace the Financial Services Commission of Ontario (FSCO), will be a more “adaptive” regulator for consumers, investors and pension plan beneficiaries, the budget says.

It will be “fully operational by April 2019.”

“The government is continuing to work with FSRA on a plan for the transition from the [FSCO],” the budget says, and the FSRA is in the process of establishing its organization structure and “upgrading key information systems.” To help, the government will propose amendments to the Financial Services Regulatory Authority of Ontario Act, 2016.

At the same time, the budget says the government continues to work on establishing the Cooperative Capital Markets Regulatory System (CCMR), which was brought to the table by the previous federal Conservative government. The budget reiterates Canada is the only G7 country without a national securities regulator, which is why it wants a CCMR to help provide “increased protection” for investors and strengthen Canada’s international regulatory presence. Currently, only five provinces and the Yukon have committed to the regulator.

Separately, the budget talks about updating Capital Markets laws. That will include “new tools” for the OSC “to enhance and expand” its enforcement powers. That will include streamlining of the administrative penalty process for first-time violations.

What’s not clear is whether these initiatives are linked to the budget’s mention of tougher financial planner oversight.

The government’s March 2018 consultation on titles reform is also vague. The document, which aims to gather feedback, offers a list of possible titles, which “should not be considered exhaustive,” it says, and adds the government will “consider an appropriate transition period” if affected advisors need to upgrade their credentials.

Prema Thiele, partner at Borden Ladner Gervais in Toronto, says it’s important for the government to recognize that how advisors use titles isn’t necessarily “a matter of title inflation.” Titles are often used to help explain “the breadth of their services,” so that functionality is important.

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The government has previously referenced what it refers to as a gap in financial industry oversight when it comes to titles. But this ignores the fact that current regulators have proficiency standards, says Thiele. The government is also focused on a large selection of individuals, from wealth planners to those specializing in mortgage and insurance, she adds, so “I’m not sure their plans will materialize as they hope. If you move to a large, integrated financial system,” it’s unclear how one regulator will be able to look at everyone.

Also, says Thiele, “What will happen to individuals in the security industry who are already engaged in defined areas of the industry? Will these reforms be outside or part of current rules?” While the government’s current consultation mentions a transition plan, there’s also CSA’s reforms to consider—the latest CSA update, from May 2017, focused most on its targeted reforms that also deal with titles, and said proposed rules would come in 2018.

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The March 2018 consultation also asks questions about the OSC and FSCO, but there’s no further detail on their role.

This contrasts with the final report on regulatory policy alternatives that was delivered to Ontario’s Ministry of Finance in March 2017, and dated Nov. 1, 2016. That report, written by an external expert committee appointed in 2015, recognized the current regulatory framework, including the work of CSA, OSC, IIROC and MFDA. It also recommended that titles reform, along with the implementation of a statutory best interest duty, be driven by an empowered FSRA and OSC.

In his budget speech, and when speaking with reporters, Finance Minister Charles Sousa didn’t provide further details. Notably absent from both the budget and his comments was any mention of the best interest standard or a national registry for planners.


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