The Ontario Securities Commission’s (OSC) consultation on its agenda for the 2025-2026 fiscal year suggests the demand for action continues to grow. That’s despite a litany of evergreen issues and reform projects that often drag on longer than expected.
The OSC’s next round of priorities will be finalized in April. Feedback includes calls for it to tackle “junk fees” in the brokerage sector, the shrinking of banks’ product shelves and the prospect of adopting open banking for the investment sector — all while also girding for a fundamental shift in regulatory policy south of the border.
Many of the issues raised in the OSC’s consultation, which ran until late December, have been around for some time but have yet to be adequately addressed. For instance, there’s a growing chorus seeking action from regulators on the banks’ outsized role in the retail investment business — including their move to limit branch-based distribution to in-house products in the wake of the Client-Focused Reforms (CFRs), which toughened product due diligence standards, among other changes to industry conduct rules in 2021.
In late 2024, the OSC and the Canadian Investment Regulatory Organization (CIRO) pledged to review the sales practices in bank branches, particularly when it comes to mutual funds. Yet, even in the wake of that promise, segments of the industry are expressing frustration with the lack of action generated by the regulators’ past efforts in this area.
In 2022, the OSC completed a review of the bank shelf issue at the behest of the Ontario government, but the results of that review, and any regulatory action that it may have produced, weren’t made public.
While there are certainly competitive concerns underlying these complaints (from both independent dealers and third-party product manufacturers), the issue is deeper than mere accusations of anti-competitive practices by the banks. It goes to whether or not the CFRs are meeting their basic investor protection objectives.
For instance, in its submission to the OSC, the Toronto-based fund giant, Fidelity Investments Canada ULC, said that the “fund industry would value greater transparency from the OSC … in order for investors and industry stakeholders to understand if the [CFRs] are operating as intended.”
Similarly, the Canadian Advocacy Council of CFA Societies Canada (CAC) said, “we remain concerned with the lack of achievement of the targeted and intended outcomes of the [CFR] project, and the seeming lack of market understanding as to what constitutes minimum acceptable standards of [know your product] and assessment of reasonable alternatives in the [clients’] best interest.”
Beyond the regulators’ promised review of banks’ sales practices, “the underlying issues that remain unresolved are deserving of a broader regulatory response,” the CAC suggested.
These concerns were echoed by the OSC’s Investor Advisory Panel (IAP), which said that it’s worried that the CFRs may have had unintended consequences that ultimately reduced “interest and investment in the advisory channel.”
Indeed, the IAP said it’s considering further research into this issue. In the meantime, it called for better guidance from regulators on complying with certain aspects of the CFRs, including the product due diligence requirements.
At the same time, investor advocates, including the IAP and the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada), also raised concerns about the rise of do-it-yourself investing, industry gamification practices and the unregulated role of social media influencers. These trends, the IAP said, have increased the risk of investors making poorly informed investment decisions and pursuing unsuitable investment strategies.
FAIR Canada recommended that the OSC consider adopting the kinds of requirements that have been proposed by the British Columbia Securities Commission (BCSC) to address promotional activity on social media, including giving investors more information about the source and credibility of online promotions. It also called on the OSC to take action to ensure that DIY investing clients receive adequate information from the industry when opening and trading their own accounts.
The OSC’s consultation also raised the issue of open banking — which makes it easier for fintechs to develop competitive new products and service offerings by enabling customers to easily share their financial information with these firms — and whether that could be extended to the investment industry.
Work on open banking has been underway at the federal level for several years. In its latest fall economic statement, the federal government promised to finalize its framework this year, and to launch open banking in early 2026.
In its submission to the OSC, Toronto-based dealer Wealthsimple Investments Inc. said it sees that initiative as “essential to fostering innovation and competition in Canada’s financial services sector.” It suggested that the project should include investment accounts, not just banking services.
“The OSC should play an active role in advocating for the extension of open banking requirements to all securities registrants, in addition to banking entities,” it said.
At the same time, Wealthsimple highlighted another persistent industry challenge — the difficulty that investors face when transferring accounts to a new dealer. Complaints about dealers being slow and unhelpful when it comes to processing account transfers aren’t new. Wealthsimple says the OSC should start tackling the fees that investors are charged for these services, which are often around $250, “with no service standard governing the speed of the transfer, and no specific recourse when there is an unreasonable delay.”
CIRO is already developing a rule (expected this spring) that will aim to set some harmonized asset-transfer standards for investment dealers and fund dealers, but Wealthsimple is calling on the OSC to “clearly label transfer fees as junk fees” and to ban or cap these charges.
The regulator’s consultation raised another fundamental operational concern — the need for more efficient communication between industry firms, regulators and investors. In its submission to the OSC, Fidelity argued that “a long-term solution for digitalization should be a priority and is already long overdue in our industry.”
Finally, the Thunder Bay, Ont.-based Anishnawbe Business Professional Association (ABPA) called on the OSC to guard against the risk of “red washing” — exaggerating actions that purport to benefit Indigenous communities, similar to greenwashing — while advancing reconciliation with First Nations.
Among other things, the ABPA called for the OSC to establish an advisory committee to represent the interests of First Nation, Métis and Inuit communities, along with measures to enhance corporate disclosure regarding Indigenous impacts.
This article appears in the February issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.