The Ontario government announced plans yesterday to establish a new pension regulator.
The Financial Services Regulatory Authority will be an independent and flexible regulatory body aimed at improving protections for consumers, investors and pension plan beneficiaries, according to the Ministry of Finance’s 2016 fiscal update.
The announcement follows recommendations by an expert panel appointed to review the mandates of the Financial Services Commission of Ontario, the Financial Services Tribunal and the Deposit Insurance Corp. of Ontario.
According to Larry Ritchie, one of the panel members and a partner at Osler Hoskin & Harcourt LLP, the new authority would replace FSCO once it’s fully operational as of an expected 2018 target date.
Read: Pension regulatory reform on the agenda as Ontario considers experts’ recommendations
In its fiscal update on Nov. 14, the government said that once it passes enabling legislation, it would take steps to support the transition process by appointing the new regulator’s initial board of directors and developing a detailed implementation plan.
In its March 2016 report, the panel said that after consulting regulators, financial services and pension sector stakeholders and investor advocates, it concluded there was a need to modernize the mandates of the agencies and change their governance, structure and accountability mechanisms.
“We do not believe a thorough transformation could be accomplished within the current regime,” the panel said in its report. “So we have recommended a new, independent and integrated regulator called the Financial Services Regulatory Authority . . ..”
Read: Ontario budget: Final report on modernization of pension plans to come this spring
In regards to FSCO, one of the big concerns was its limited resources, says Ritchie. “The structure of the current regulatory model didn’t allow it to be as nimble and flexible to cope with a rapidly changing environment in a way that was responsive to the needs of market participants and consumers,” he says.
According to Ritchie, the panel recommended the new regulator should:
- Have an expert board of directors;
- Recover its operating costs by imposing proportional fees and levies on the financial sectors it regulates;
- Be operationally independent from the government;
- Have authority to make and enforce rules, as limited by its enabling statute;
- Have an obligation to act in a transparent and principled way, guided by a clearly articulated mandate set out by its enabling statute.
Currently, the superintendent of financial services has the power to make regulatory policies that are in line with the Pension Benefits Act, with no discretion to go beyond what the legislation permits, said Andrea Boctor, head of the national pensions and benefits group at Stikeman Elliott LLP.
By giving the authority more rule-making powers, employers will have “more direction and certainty that when they do something in accordance with one of the rules that the FSRA has put forward, that that is the correct way to do it,” Boctor told Benefits Canada previously.
Read: Ontario establishes new body to manage public pensions, investment funds
Included in its vision for the new regulatory body, the panel described three divisions — each with its own superintendent of either market conduct, prudential oversight or pensions — that will work separately but liaise through upper management.
“Our recommendation is that within FSRA, there would be a distinct person and staff responsible for overseeing pensions,” says Ritchie. “Right now, the same superintendent is responsible over all of the areas . . . but within [FSRA], our recommendation is that there be a group with specialized expertise in the areas of pensions . . ..”