Plan sponsors awaiting a final report on modernizing and increasing accountability in the regulations of financial services and pension plans in Ontario should be wary of a recommendation that would give the new regulator binding rule-making authority and the ability to impose fines on those that don’t follow the rules.
“That’s a bit of a sea change, given that right now the regulator enforces existing legislation,” said Mark Firman, a partner in McCarthy Tetrault’s pension, benefits and executive compensation group in Toronto.
“It can come up with policies and those are helpful guidelines, but it can’t actually fine you if you don’t follow its guidelines, for example, [around] the SIPP and ESG … that’s the regulator’s best guidance, but legally, if you have a good reason for not following it, you’ve always historically been protected.”
Read: SIPP requirements: Out of the boilerplate and into the boiler
The Ontario pension regulator’s mandate was reviewed last year and a preliminary position paper, which included the recommendation among significant reforms to the regulatory landscape, was published in November.
A final paper, which is expected in the spring, is to come from the expert advisor panel that has been reviewing the mandates of the Financial Services Commission of Ontario, the Financial Services Tribunal and the Deposit Insurance Corporation of Ontario, with the goal of modernizing the regulations and increasing agency accountability.
Read: Ontario Budget: Final report on modernization of pension plans to come this spring
According to the budget: “The government is committed to modernizing and strengthening the regulation of financial services and pensions, and to improving consumer, investor and pension plan beneficiary protection. Necessary legislative or regulatory changes will be identified and pursued as early as possible.”
Of particular concern for employers, said Firman, would be that the regulator would be able to set rules outside the bounds of parliament and also impose consequences on plan sponsors that don’t follow those rules.
“I’d be curious how constrained that rule-making power is proposed to be,” he added. “I’d prefer it not be there, frankly. But if it is there, [will it be] so circumscribed that it’s hard to argue against?”