Ontario legislation creating a new pension regulator and giving it powers to impose administrative monetary penalties will create an environment with considerably more regulatory muscle, pension lawyers say.
“My suspicion is that we’re going to see a very different regulator,” says Paul Litner, a partner at Osler Hoskin & Harcourt LLP in Toronto.
“The combined effect of the changes to the Pension Benefits Act and the creation of the Financial Services Regulatory Authority will result in a regulatory environment that has more muscle and one that is willing to flex that muscle and ensure compliance.”
According to Litner, the new regulator will be more like the Ontario Securities Commission. The agency will have broad authority across multiple financial sectors, not just pensions, with the power to modernize the current regulators: the Financial Services Commission of Ontario, the Deposit Insurance Corp. of Ontario and the Financial Services Tribunal.
“FSRA will be self-funded, independent of government but accountable to government, and proactive in making policy,” says Litner.
Much of the regulator’s added clout will come from legislative amendments that allow the superintendent of pensions to impose administrative monetary penalties of up to $25,000 for non-compliance with the act or regulations. Those amendments, which followed last week’s fall economic statement by the Ontario government, are something of a surprise.
“We hadn’t heard that these were on the horizon,” says Kathryn Bush of Blake, Cassels & Graydon LLP.
The current procedure for imposing penalties is much more cumbersome than the proposed new process. Under the current one, fines are only available upon conviction for a quasi-criminal offence under the Provincial Offences Act.
“This requires the attorney general to take over the prosecution,” says Bush. “AMPs provide a more flexible and streamlined avenue for imposing penalties.”
While it’s unclear how far the new regulator will push administrative monetary penalties, Bush expects it to seek more penalties.
“You can probably count on one hand the instances of non-compliance that have been enforced under the current system,” she says.
As it turns out, the government recently amended the Pension Benefits Act to require plan sponsors to file statements of investment policies and procedures.
“This is one area where I wouldn’t be surprised to see penalties imposed for non-compliance,” says Litner.
The legislation creating the new authority, Bill 70, is the first step in the government’s response to a report from an expert advisory panel on the mandate of provincial financial regulators earlier this year. But that first step, perhaps not surprisingly, is bare bones.
“It’s only a framework,” says Bush. “There’s not much information or meat so far.”
Indeed, Bill 70 doesn’t set a clear mandate; rather, it states only that the new authority is to regulate certain financial sectors. It doesn’t provide rule-making power, as recommended by the panel. And while the legislation provides for a supervisory board appointed by cabinet and a chief executive officer, the government hasn’t spelled out the relationship between that person and the superintendent of financial services.
But while the details and timelines are unclear, financial services and pension lawyers are confident the Ontario government will move quickly.
“The new legislation significantly evidences the government’s intent to proceed with the recommendations of the advisory panel in whole or in part,” says Litner.