SECURITIES REGULATION & IR

The Ontario Securities Commission (OSC) has released its Statement of Priorities for its 2023-2024 fiscal year (2023-2024 SOP). Beyond its core regulatory operations, the 2023-2024 SOP sets out four strategic goals on which the OSC intends to focus its resources and actions in the fiscal year: (1) building trust and fairness in Ontario’s capital markets; (2) strengthening investor safeguards; (3) adapting regulation to align with innovation and evolving markets; and (4) enabling the organization to deliver effective regulation.

Issuers should be aware of the OSC’s renewed focus on emerging trends and key drivers of change, including diversity and environmental, social and governance (ESG) disclosure.

The 2023-2024 SOP sets out key priority initiatives that the OSC will pursue in support of each strategic goal.

Goal #1: Building Trust and Fairness in Ontario’s Capital Markets

Key priorities to achieve this goal include:

• advancing work on ESG disclosures for reporting issuers;
• considering broader diversity on Boards and in executive roles at reporting issuers;
• advancing cooperation with Indigenous Peoples and working to integrate their perspectives and interests;
• completing the development of the over-the-counter derivatives regulatory framework;
• implementing the new single enhanced self-regulatory organization and investor protection fund; and
• enhancing information sharing with the Canadian Public Accountability Board.

Goal #2: Strengthening Investor Safeguards

Key priorities to achieve this goal include:

• expanding the focus on retail investors through specific education, policy, research and behavioural science activities;
• strengthening investor redress and the Ombudsman for Banking Services and Investments as an independent dispute resolution service; and
• monitoring and responding to the impacts of the deferred sales charges ban and order-execution-only ban.

Goal #3: Adapting regulation to align with innovation and evolving markets

Key priorities to achieve this goal include:

• strengthening oversight and enforcement in the crypto asset sector;
• streamlining periodic disclosure requirements for corporate finance and investment fund reporting issuers;
• modernizing delivery options of regulatory and continuous disclosure filings for issuers; and
• completing the transition to SEDAR+.

Goal 4: Enabling the organization to deliver effective regulation

Key priorities to achieve this goal include:

• attracting, developing and retaining talent;
• executing the OSC’s inclusion and diversity strategy; and
• integrating data and processes to support effective decision-making and risk monitoring.

Disclosure-Related Priorities of the OSC

Diversity Initiatives

In order to increase transparency for investors and other stakeholders, in 2014 the OSC and participating Canadian Securities Administrators (CSA) jurisdictions adopted disclosure requirements related to the representation of women on Boards and in executive officer positions at companies listed on the Toronto Stock Exchange. In May 2020, the CSA announced further research and consultations regarding broader diversity on Boards and executive roles, including the representation of people who self-identify as Black, Indigenous, persons of colour, persons with disabilities, or LGBTQ2+.

In furtherance of the CSA’s efforts to broaden diversity on Boards and in executive roles, the OSC plans to publish for comment proposed changes to the disclosure requirements on diversity, Board renewal and the director nomination process and related corporate governance guidelines. The OSC will consider feedback from stakeholders and conduct further targeted consultations and engagements. The OSC also intends to engage further with Indigenous organizations to develop a better understanding of the needs of, and the regulatory impacts on, Indigenous Peoples.

ESG Reporting Practices

The OSC is committed to making Ontario’s capital markets globally competitive and an attractive place in which to invest, grow businesses and create jobs. One way that the OSC upholds that commitment is through a balanced policy framework, access to information to make informed investment decisions, exercising effective compliance oversight, and pursuing timely and vigorous enforcement. 

The OSC commented that, although growth of institutional and retail investor interest in ESG finance continues, ESG reporting practices are still nascent. As part of its efforts to promote confidence in corporate disclosure, the OSC continues to focus on advancing ESG disclosure standards and compliance monitoring that support informed decisions by investors and market participants.

The Spring 2021 Ontario Budget included a government commitment to consult on ESG disclosures. In October 2021, the CSA published proposed National Instrument 51-107 Disclosure of Climate-related Matters (NI 51-107) for comment, which would require reporting issuers other than investment funds to disclose certain climate-related information. Since then, important international developments have occurred, including the U.S. Securities and Exchange Commission proposing amendments to rules that would require registrants to provide certain climate-related information in their registration statements and annual reports, and the International Sustainability Standards Board proposing general standards for disclosure of sustainability-related financial information.

In 2023-2024, the OSC will lead the consideration of international developments and how they may impact or further inform the proposed NI 51-107.

The OSC will also participate in the Federal Government’s Sustainable Finance Official Sector Coordinating group and complete a focused review of ESG disclosures by investment funds in accordance with CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure and publish a summary of findings and any guidance updates by December 2023.

Conclusion

While most of the OSC staff resources continue to be committed to its fundamental core regulatory operations, providing stability, transparency, and continuity in the regulations of Ontario’s capital markets, the OSC’s four strategic goals focus the OSC’s actions and resources above and beyond the core regulatory operations. These goals build on previous strategic goals and focus on emerging trends and key drivers of change. In particular, issuers should be aware that changes to diversity and ESG disclosure are currently being considered by the OSC and, as such, should stay informed on the matter.

David Frost is a Partner at McCarthy Tétrault LLP. This article was written with co-authors Thomas Fung (Associate) and MIchelle de Haas (Associate) at McCarthy Tétrault LLP.