Ontario Enacts the Financial Services Regulatory Authority of Ontario Act, 2016
December 23, 2016
On December 8, 2016, the Building Ontario Up for Everyone Act (Budget Measures), 2016 (“Bill 70”) received Royal Assent. Among other things, the omnibus budget legislation enacts the Financial Services Regulatory Authority of Ontario Act, 2016, (the “FSRA Act”) setting out the framework for the creation of the new Financial Services Regulatory Authority (“FSRA”).
By way of background, the Minister appointed an expert advisory panel to review the mandates of both FSCO and the Financial Services Tribunal. In a final report released to the public in June 2016, the panel concluded that “radical change” was necessary to establish a world-class financial services and pensions regulator in Ontario, and made 44 recommendations which focused on the creation of a single integrated organization that would replace FSCO.
Under the FSRA Act, the FSRA will consolidate various regulatory functions related to pensions, insurance, trust companies, credit union, caisses populaires, co-operatives, and mortgage brokers into one body, just as FSCO did. This structure is in stark contrast to what was proposed by the 2008 expert commission in Ontario, which urged the creation of an independent single-purpose pension regulator. It remains unclear from the FSRA Act whether the FSRA will have an independent division which regulates pension administration, as well as separate divisions which regulate market conduct and prudential oversight. Subject to the approval of the Minister, the FSRA Act provides the board of directors of the FSRA with powers to make by-laws governing the management of the FSRA, among other administrative and structural issues.
A separate division focused on pension administration recognizes the unique nature of pensions, and courts have repeatedly recognized the need for specialized expertise in the pension field. However, under the proposals of the expert advisory panel, these divisions would still function within one regulatory authority that is tasked with overseeing a number of mandates. There remain concerns that the authority of the pension regulator may be constrained by the FSRA’s overall mandate. If implemented, the proposed creation of various divisions within the FSRA, while a positive structural change to the current regulation of pensions in Ontario, falls short of the recommendations of the 2008 expert commission.
While the final report also outlined recommendations for changes to the FST, these were not addressed in Bill 70 and it is unclear whether these will be implemented in addition to the FSRA Act establishing the new FSRA.
The FSRA Act lacks sufficient detail on a number of things, including the FSRA’s mandate and principles by which it operates, and the tools and means the agency will have at its disposal. These will likely be set out in the by-laws made by the board of directors of the FSRA. As such, more details are required before the actual impact of the FSRA on pension regulation in Ontario can be determined.
Pension and Benefits