Report urges stronger protection for investors

New powerful agency recommended to oversee pensions, financial services

An expert panel is proposing sweeping changes that would boost consumer protection for borrowers, investors and retirees in Ontario amid rapid changes in the financial services industry.

The key recommendation is the creation of a super agency that would be more powerful, more flexible and more accountable than the three existing agencies responsible for regulating auto insurance, pension plans, mortgage brokers, loan and trust companies and credit unions.

The panel is also calling for the creation of an Office of the Con- sumer and a compensation fund for investors who are victims of fraud.

Quebec is the only province that compensates victims of investment fraud.

“With financial services and pensions sectors changing at a rapid pace, we need a regulator that is sufficiently independent, flexible, innovative and expert,” according to the panel’s report, called Review of the Mandates of the Financial Services Commission of Ontario, the Financial Services Tribunal and the Deposited Insurance Corporation of Ontario.

“We do not believe a thorough transformation could be accomplished within the current regime. So we have recommended a new, independent and integrated regulator called the Financial Services Regulatory Authority (FSRA),” the panel says in its report.

The new agency, the report says, would:

Operate independently, outside the Ontario Public Service; Be self-funded; Be governed by an independent board of directors with rule-making authority; and

Be accountable to the Ontario finance minister.

Also, it would replace the existing Financial Services Commission of Ontario and have powers similar to the Ontario Securities Commission, the report said.

The panel’s recommendations would apply to provincially regulated financial services. That would not include federally regulated banks, for example.

The Insurance Bureau of Canada said it would urge the Ontario government to quickly adopt the panel’s recommendations.

“Given the rapid pace of change in the financial world, we believe the new regulator needs to be nimble and foster a strong, vibrant and innovative financial services sector,” said Kim Donaldson, the bureau’s vice-president, Ontario.

Co-authored by former insurance and pension industry executive George Cooke, personal finance writer James Daw and former Ontario Securities Commission vicechairman Lawrence Ritchie, the report’s final recommendations are similar to those in its preliminary proposal last fall.

The panel was set up in March 2015 by Finance Minister Charles Sousa to undertake the review. The minister is reviewing the report, a spokesperson said Monday in a statement.

Investors who lost $300 million in Ontario-based First Leaside Secu- rities Inc. have been unable to claim losses from the Canadian Investor Protection Fund because the principals behind the investment scheme were convicted of fraud.

Syndicated mortgages should be regulated the same way as other investments, such as stocks and bonds, the panel’s report also says. And individuals who are banned from selling one type of security would also be banned from selling others, closing a regulatory gap, the panel said.

“There is a widespread desire for Ontario to modernize its approach to regulation of financial services and pensions amid a changing environment,” the panel says in its report.

“Yet some groups want no change. They feel well served already or seem weary of change, increased regulation or scrutiny. “But we disagree.” Some 7,200 provincially registered pension plans in Ontario manage $520 billion in assets.