SECURITIES REGULATION & IR

                                   
(left to right: David Frost, Partner; Sarah Xu, Associate; and Thomas Fung, Associate, McCarthy Tétrault, LLP)

The Autorité des Marchés Financiers (AMF), the Ontario Securities Commission (OSC) and the United States Securities and Exchange Commission (SEC) have all published their respective statements of priorities for 2024-2025. These statements outline key initiatives for each regulator as part of its broader strategic or business plan and focus on mitigating and managing risks to investors and other stakeholders. These regulatory bodies, while operating within different jurisdictions, exhibit overlapping concerns and objectives that underscore the global nature of financial markets and regulation. The strategic priorities for 2024-2025 not only reflect the current state of the financial sector but also set a proactive agenda for addressing the challenges and opportunities that lie ahead.

Key Similarities between AMF, OSC and SEC Priorities

Overall, the AMF, OSC and SEC have some key similarities in their strategic priorities for the 2024-2025 period, indicative of a response to similar challenges in financial regulation. All three entities prioritize the oversight and regulation of the rapidly evolving crypto asset market, recognizing the need to adapt their regulatory frameworks to effectively manage the risks and complexities associated with digital currencies and related trading platforms. There is a shared recognition of the importance of technology in enhancing regulatory capabilities, with each body investing in advanced systems for market surveillance, enforcement and the detection of financial misconduct.

Similarities Between AMF and OSC Priorities

AMF and OSC, both Canadian entities, share several key priorities for 2024-2025. These include efforts to alleviate the compliance burden for market participants by simplifying regulations and modernizing documentation processes. Both regulators are collaborating with the Canadian Securities Administrators (CSA) and other regulatory bodies to update the regulatory framework, particularly regarding mutual fund sales practices and over-the-counter derivatives clearing requirements. A strong emphasis is also placed on advancing Environmental, Social and Governance (ESG) disclosures, with initiatives to adopt climate-related disclosure standards and enhance diversity in corporate leadership. Both regulators are committed to publishing regulatory proposals and finalizing amendments to improve transparency regarding climate-related risks, as well as increasing diversity within corporate Boards and executive teams.

Similarities Between AMF and SEC Priorities

Both the AMF and SEC are investing in advanced technology to enhance their capabilities in market surveillance and to combat market abuse, emphasizing the importance of detecting and addressing potential misconduct. The SEC places specific attention on information security and operational resiliency to safeguard investor data and mitigate service disruptions, and this aligns with the AMF's broader goal of optimizing detection and surveillance methods to maintain market integrity.

Similarities Between OSC and SEC Priorities

Both regulators recognize the significance of incorporating advanced technology and infrastructure to enhance their ability to identify emerging risks, improve operational efficiencies and streamline processes. Both focus on leveraging data, analytics and digital solutions, which shows they are investing in technology to better identify trends and emerging risks and to ensure their operations are efficient and responsive to market dynamics.

Key Differences between AMF, OSC and SEC Priorities

The AMF has announced it will soon be publishing a guideline on the responsible use of artificial intelligence (AI), whereas AI is being considered an emerging risk that is being monitored and considered by the OSC and SEC. The OSC and SEC have instead focused on investing in new technology and infrastructure to improve operations. The AMF has also committed to investing in new technologies and training; however, this is targeted at enforcement activities, specifically to improve its detection capabilities to counter schemes.

While the SEC shares the AMF’s and OSC's interest in the regulation of crypto assets and the adoption of new technologies, the American regulator's priorities for 2024-2025 diverge in one notable aspect: the SEC does not emphasize ESG disclosures as part of its key initiatives for the period. This marks a clear shift from its 2023 priorities, where ESG disclosures and combatting greenwashing were significant focus areas.

Instead, the SEC is placing a stronger emphasis on information security and operational resiliency, aiming to protect investor information, records and assets from cybersecurity threats and other disruptions. Information protection and the uninterrupted operation of critical services are central to the SEC's strategic objectives, highlighting a proactive stance toward safeguarding investor data, records and assets. The SEC is set to intensify its examination of how registrants manage and report cyber threats and incidents, reflecting an acute awareness of the escalating threats posed by cyberattacks. This emphasis also takes into account the broader challenges facing firms, such as the widespread nature of their operations, the increasing severity of weather events and the complexities introduced by geopolitical tensions.

The SEC's focus on anti-money laundering (AML) compliance also stands out, reflecting a proactive approach to addressing the potential misuse of the financial system for illicit purposes. This priority is set against the backdrop of increasing AML investigations and charges by U.S. law enforcement agencies, signifying heightened scrutiny in this area.

Takeaway

The AMF, OSC and SEC have laid out their strategies for 2024-2025, reflecting a blend of shared concerns and unique regional emphases that illustrate the interconnected yet diverse landscape of global financial regulation. While all three regulatory bodies emphasize the need to adapt to the dynamic crypto asset market and leverage technology for market surveillance and enforcement, there are distinct differences that set their agendas apart. The AMF and OSC are closely aligned with their emphasis on simplifying compliance, advancing ESG disclosures and enhancing market integrity through technology. The SEC's distinct focus on information security, operational resiliency and AML compliance underscores its response to needs and risks identified in the U.S. financial environment. These differences notwithstanding, the collective efforts of the AMF, OSC and SEC demonstrate a robust and forward-thinking approach to financial regulation that aims to protect investors, maintain fair and efficient markets and address the challenges of an increasingly digital and globalized financial system.

David Frost is a Partner at McCarthy Tétrault LLP. This article was written by Sarah Xu, Associate and Thomas Fung, Associate, McCarthy Tétrault, LLP.