The key recommendation is the creation of a super agency that would be more powerful, more flexible and more accountable than the three existing agencies responsible for regulating auto insurance, pension plans, mortgage brokers, loan and trust companies and credit unions.
The panel is also calling for the creation of an “Office of the Consumer” and a compensation fund for investors who are victims of fraud. Currently, Quebec is the only province that compensates victims of investment fraud.
“With financial services and pensions sectors changing at a rapid pace, we need a regulator that is sufficiently independent, flexible, innovative and expert,” according to the panel’s report, called Review of the Mandates of the Financial Services Commission of Ontario, the Financial Services Tribunal and the Deposited Insurance Corporation of Ontario.
“We do not believe a thorough transformation could be accomplished within the current regime. So we have recommended a new, independent and integrated regulator called the Financial Services Regulatory Authority (FSRA),” the panel says in its report.
The new agency would operate independently, outside the Ontario Public Service; be self-funded; be governed by an independent board of directors with rule-making authority; and be accountable to the Ontario Minister of Finance, the report says.
It would replace the existing Financial Services Commission of Ontario and have powers similar to the Ontario Securities Commission, the report said.
“Given the rapid pace of change in the financial world, we believe the new regulator needs to be nimble and foster a strong, vibrant and innovative financial services sector,” Kim Donaldson, the bureau’s vice-president, Ontario, said in a statement.
Co-authored by former insurance and pension industry executive George Cooke, personal finance writer James Daw and former Ontario Securities Commission vice-chair Lawrence Ritchie, the report’s final recommendations are similar to those in its preliminary proposal last fall.
“Financial services is one of the fastest-growing sectors in our economy,” Sousa said at the time. “These key organizations are our partners in consumer protection. Reviewing their mandates will ensure that we are doing our best to protect the interests of Ontarians while fostering a strong business environment. I look forward to receiving the panel’s recommendations on how we can make this sector even stronger.”
Investors who lost $ 300 million in Ontario-based First Leaside Securities Inc. have been unable to claim losses from the Canadian Deposit Insurance Corporation because the principals behind the investment scheme were convicted of fraud.https://www.thestar.com/business/2016/04/29/the-high-risk-world-of-syndicated-mortgages.html
Syndicated mortgages should be regulated the same way as other investments, such as stocks and bonds, the panel’s report also says. And individuals who are banned from selling one type of security would also be banned from selling others, closing a regulatory gap, the panel said.
Critics of Fortress Real Developments Inc., a Richmond Hill real-estate investment firm, have complained that syndicated mortgage money is raised for those projects even though CEO Jawad Rathore has been banned from selling mutual funds and other securities.
“This report shows FSCO isn’t doing their job. They don’t have qualified staff to investigate. They don’t understand this marketplace,” said David Franklin, a lawyer representing two clients who invested in a Barrie real-estate development that ran into financial trouble.
A Fortress spokesperson has said those earlier bans were unrelated to Fortress activities.
“There is a widespread desire for Ontario to modernize its approach to regulation of financial services and pensions amid a changing environment. Yet some groups want no change. They feel well served already or seem weary of changed, increased regulation or scrutiny. But we disagree,” the report says.
The Canadian Foundation for the Advancement of Investor Rights (FAIR) has said the current regime is not adequately fulfilling its mandate and falls short when it comes to enforcement.