Actions in progress

Review provincial and federal harmonization opportunities to support start-ups

Status: Action in progress

What we heard

Ontario regulations that impact the fintech sector are not aligned with rules and requirements from other provinces and federal bodies. This makes it difficult for fintech companies and other start-ups to grow and expand into new jurisdictions, as these companies must spend time and money to review, understand and comply with multiple sets of rules and requirements.

Our plan

The Ministry of Finance harmonizes Ontario regulations with those of other provincial and federal regulators whenever it can. In 2017, the Canadian Securities Administrators, the Canadian umbrella organization for securities regulators, launched a “regulatory sandbox” to support innovative business models. Using the sandbox, regulators can assess the merits of business models on a case-by-case basis, and businesses that register or receive relief from securities regulatory requirements could be permitted to test their products and services throughout the Canadian market.

The government is also committed to establishing the Financial Services Regulatory Authority of Ontario (FSRA), a new, flexible and innovative financial services and pension regulator. As part of this work, the government will take this idea into account and also bring it and other feedback from the Red Tape Challenge to the FSRA board for its independent consideration.

The Financial Services Commission of Ontario (FSCO) has established its own working group to ensure that fintech-enabled start-ups and incumbents have a single point of contact for engaging with and accessing the regulator. As well, in its 2017-20 Strategic Plan, the Canadian Council of Insurance Regulators (CCIR), of which FSCO is a member, has included working with regulatory authorities across sectors to develop a framework for coordinated research, information sharing and the regulation of emerging technologies as a priority.

Simplify financial services forms and regulations

Status: Action in progress

What we heard

Mortgage paperwork, investor disclosure forms and other Financial Services Commission of Ontario forms are long, overly complex, and difficult to understand. This makes filling out forms confusing and time-consuming.

Our plan

Mortgage and investor forms provide important information that helps borrowers, lenders and investors make informed decisions. The Financial Services Commission of Ontario has recently established a three-year plan to review all its forms, and where possible, simplify these forms.

Update the Pension Benefits Act and align requirements with other locales

Status: Action in progress

What we heard

Multiple issues related to the requirements under the Pension Benefits Act (PBA) were identified. Financial reporting requirements under the PBA for defined contribution pension plans are unnecessarily complex and costly to comply with. There is also legal uncertainty over employer liability when offering a pension plan through a third-party administrator. Finally, section 43 of the PBA reduces the incentive for administrators to annuitize because the section does not relieve the administrator of its financial obligations in the event of an annuity provider going bankrupt.

Our plan

As the share of defined contribution workplace pension plans grows, the Ministry of Finance will continue expanding and modernizing its legislative and regulatory frameworks. In 2017-18, the ministry will explore how it can enhance transparency to modernize member communications and create regulatory efficiencies.

Additionally, in 2016 the ministry consulted on the use of annuities and whether administrators should retain any liabilities after purchasing an annuity. As a result of those consultations Ontario announced in May 2017 that it will introduce changes to the PBA to provide a discharge of administrator’s liability, in certain circumstances, when an annuity is purchased in respect of a deferred or retired member.

Simplify credit union forms and regulations

Status: Action in progress

What we heard

The Credit Union and Caisses Populaires Act has regulations and forms that are unclear and hard to understand. In addition, the act does not provide definitions for lines of credit, the consequences for not paying, or an explanation of re-financing. This lack of clarity and guidance creates uncertainty, higher compliance costs, and barriers for business.

Our plan

The Ministry of Finance is developing new legislation for credit unions as part of implementing the recommendations contained in the report on the review of the Credit Unions and Caisses Populaires Act, 1994 (CUCPA), published in 2016. The ministry will consider simplifying requirements while ensuring that a high standard of member protection is maintained. The Financial Services Commission of Ontario has recently established a three-year plan to review all its forms and includes those under the CUCPA. In addition, the ministry will work with the Deposit Insurance Corporation of Ontario to look for opportunities to simplify existing credit union forms.

Review qualification standards for insurance and investment advisors

Status: Action in progress

What we heard

Current investment and insurance advisor entry requirements are not strict enough. This damages the industry’s professional reputation and lowers public trust. The current approach to consumer protection relies on costly disclosure and reporting requirements, and increasing qualification standards could be a more cost-effective approach.

Our plan

In January 2016, the Financial Services Commission of Ontario (FSCO) joined with the Canadian Insurance Services Regulatory Organizations’ (CISRO) other insurance regulators to update and harmonize proficiency requirements for individuals who want to become life insurance agents. The updated program is the product of significant work by regulators and industry stakeholders and included extensive industry participation and consultation. The harmonized Life Licence Qualification Program (LLQP) has established a consistent standard of qualifications and practice for entry-level life insurance agents across the country. The Ministry of Finance will consider this recommendation as part of its work to establish the Financial Services Regulatory Authority of Ontario, a new, flexible and innovative financial services and pension regulator that will have the goal of strengthening consumer, investor and pension plan beneficiary protection.

The ministry will also work with financial services regulators to develop Ontario financial planning and advisory services qualifications. These qualifications will respond to the 2017 Financial Advisory and Financial Planning Regulatory Policy Alternatives report. Over the coming year, the ministry will work with its regulatory partners to close the gap that currently allows financial planners to perform their work without regulatory oversight or specified proficiency requirements.

Actions tracking

Develop a pilot program to allow all fintech start-ups a regulatory grace period

Status: Action tracking

What we heard

Fintech start-ups in Ontario have to immediately comply with all financial services regulations. These rules and requirements can be especially burdensome for start-ups, as they are not given the time to grow and develop their business before they have to spend significant time and money complying with regulations.

Our plan

The Ministry of Finance will take this idea into account as part of its work to establish the Financial Services Regulatory Authority of Ontario (FSRA), a new, flexible and innovative financial services and pension regulator that will strengthen consumer and investor protection. It will also bring this idea to the FSRA board for its independent consideration.

Meanwhile, the Ontario Securities Commission LaunchPad, started in 2016, is helping early-stage fintech companies comply with securities laws and get to market sooner while making sure that investors are appropriately protected.

Review the audit process for financial services institutions

Status: Action tracking

What we heard

Online insurance and financial service providers feel that they are audited more frequently, partly because of their transparent nature. These audits require significant time and resources and create an uneven playing field between online providers and traditional financial services businesses.

Our plan

The Financial Services Commission of Ontario (FSCO) regulatory audits follow internationally recognized supervisory standards and are aimed at protecting consumers and investors. The Ministry of Finance will work with FSCO to make sure regulatory audits are easier to understand and the burdens they cause are minimized. This work will take place as part of the government’s commitment to establish the Financial Services Regulatory Authority of Ontario (FSRA), a new financial services and pension plan regulator.

Improve online access to personal identity information and authentication for financial services businesses

Status: Action tracking

What we heard

Financial services businesses face multiple issues in verifying and accessing personal identity information and authenticating business information. These issues include: difficulty accessing beneficial ownership information, and challenges in complying with requirements for pension administrators to contact and locate plan members with out-of-date contact information. These issues create unnecessary costs and delays for financial services businesses, making it more difficult to serve clients effectively and efficiently.

Our plan

The Ministry of Finance will discuss these issues with the Financial Services Commission of Ontario (FSCO). The ministry will also consider them as part of the ministry’s work to establish the Financial Services Regulatory Authority of Ontario (FSRA), a new body that will be committed to making Ontario’s regulations more flexible and innovative.

The ministry will also consider creating a publicly searchable missing-beneficiaries registry to which employers or administrators could post information. As there are currently no relevant guidelines, the ministry in 2017 instructed FSCO to provide pension plan administrators direction on locating beneficiaries.

Also in 2017, the ministry is amending the Pension Benefits Act so the requirement to provide periodic statements can be waived when a plan administrator demonstrates a beneficiary is missing.

Review licensing requirements for financial services professions

Status: Action tracking

What we heard

Unlicensed mortgage lenders do not follow existing rules, which creates an uneven playing field in the mortgage industry. Additionally, current investment and insurance advisor entry requirements are not strict enough. This damages the industry’s professional reputation and lowers public trust.

Our plan

The Ministry of Finance will consider reviewing licensing requirements for financial services professionals in partnership with the Financial Services Commission of Ontario and financial services regulators across Canada.

The ministry is also committed to establishing the Financial Services Regulatory Authority of Ontario (FSRA), a new, flexible and innovative financial services and pension regulator; the ministry will also bring the idea to FSRA’s board for its independent consideration.

The ministry will also work with regulators to develop specific measures related to financial planning and advisory services. These measures will respond to the 2017 Financial Advisory and Financial Planning Regulatory Policy Alternatives report.

Allow pension administrators to do business with clients electronically

Status: Action tracking

What we heard

The Pension Benefits Act and the Electronic Commerce Act are not clear about whether pension administrators are legally allowed to communicate and collect information electronically. Also, pension plan members must provide consent before receiving e-communications. Therefore, most administrators use the default paper-based option, which is more costly and inefficient. Finally, each province has different rules and requirements for accepting e-signatures, which adds unnecessary costs and complexity to otherwise standard processes.

Our plan

The Ministry of Finance will consult with stakeholders throughout 2017 on electronic pension plan communications as part of its commitment to modernize pension plan member communications and to create regulatory efficiencies.

Work with the pension industry to determine how best to capture gender information

Status: Action tracking

What we heard

Adding a third-gender identifier on Ontario identification documents impacts the ability of pension providers to conduct actuarial assessments on potential members. This creates additional costs to pension providers in developing new assessment models and has a negative impact on their business models.

Our plan

The Ministry of Finance will discuss this recommendation with the Canadian Institute of Actuaries, the professional body responsible for the standards of practice that govern the preparation of pension plan actuarial valuations.

Develop standardized addenda for transferring pensions to Locked-In Retirement Accounts or Life Income Funds

Status: Action tracking

What we heard

The current process for transferring a pension to a Locked-In Retirement Account or Life Income Fund (LIRA/LIF) is time-consuming and costly, as it requires developing additional materials or addenda to outline the details of the arrangement. These materials have to be reviewed by the Office of the Superintendent of Financial Institutions, which creates costly delays in the process.

Our plan

In 2017 the Ministry of Finance will determine with the Financial Services Commission of Ontario if developing standardized forms would be an appropriate way to lessen the administrative burden on businesses or if it may create additional burdens. Stakeholders will be consulted in this process.

Address discrepancies with guaranteed minimum withdrawal benefits under the Pension Benefits Act

Status: Action tracking

What we heard

Guaranteed minimum withdrawal benefits on certain Life Income Funds mean that in some cases, the money taken out is higher than the amount allowed under Regulation 909 of the Pension Benefits Act. These discrepancies create uncertainty for businesses and beneficiaries.

Our plan

The Ministry of Finance will request additional information from the insurance sector to determine the scope of the problem and gather further data, such as the number of affected account holders, before developing recommended government options by fall 2017.

Review mandatory requirements for mortgage brokers

Status: Action tracking

What we heard

Businesses feel that current mortgage broker requirements have led to higher fees, have minimal impact on promoting choices for consumers and do not effectively protect consumers. Some requirements are seen as excessive, such as mandated errors and omission insurance, minimum financial guarantees and requirements to hold an Ontario address in order to hold a licence.

Our plan

As part of the next five-year review of the Mortgage Brokerages, Lenders and Administrators Act, 2006, the Minister of Finance is required to appoint a lead person by July 1, 2018. The government will be reviewing the requirements for mortgage brokers and consider how to lessen the regulatory burden while making sure that a high standard of consumer protection is maintained.

Clarify the process for idle credit union accounts

Status: Action tracking

What we heard

Under section 182 of the Credit Unions and Caisses Populaires Act, credit unions are required to give control of idle accounts with 10 or more years of inactivity to the Minister of Finance. These idle accounts are supposed to be stored in a central place where individuals can access their money, but the act does not provide any specific details. The lack of clarity creates additional administrative costs for credit unions and makes it more difficult for money to be returned to the rightful owners.

Our plan

The Ministry of Finance is developing new legislation for credit unions as part of implementing the recommendations following the review of the Credit Unions and Caisses Populaires Act, 1994, published in 2016. The ministry will consider the treatment of inactive credit union deposits in developing the new legislation, and consult stakeholders as part of the process.

Harmonize provincial and federal financial regulators

Status: Action tracking

What we heard

There are several provincial and federal financial regulatory agencies that appear to have overlapping responsibilities, making it difficult for businesses to understand the role of each individual agency. This creates uncertainty and increases compliance costs for businesses.

Our plan

The Ministry of Finance is establishing the Financial Services Regulatory Authority of Ontario (FSRA) — a new, flexible and innovative financial services and pension regulator — and plans to introduce legislative amendments regarding the regulator’s mandate and governance structure by the end of 2017. As part of that work, the ministry will take into account the recommendation for a more harmonized approach to regulation as well as bring it to FSRA’s board for its independent consideration.

Develop an online resource for financial services regulations

Status: Action tracking

What we heard

There is a lack of clarity around which financial services regulations apply to fintech businesses. Regulations are spread across various pieces of legislation and levels of government, making it difficult for businesses to know which requirements apply to them and how to comply. As a result of this uncertainty, some organizations have to spend large amounts of money on legal fees to ensure they are meeting requirements. This creates barriers to growth for start-ups, as they are forced to spend excess time and money on determining their regulatory obligations, rather than on growing their business.

Our plan

The Ministry of Finance will work with Ontario’s main financial services regulators, the Ontario Securities Commission and the Financial Services Commission of Ontario, to review existing online regulation resources.

No action recommended

Improve the next of kin payments system under the Pension Benefits Act

Status: No action recommended

What we heard

If an individual dies without a will, it is very costly and time-consuming for their next of kin to obtain the necessary paperwork to receive any payment from the deceased person’s pension plan. As a result, many do not bother applying, and the money stays with the pension administrators for long periods of time. This current system creates burdens for families and makes it difficult to access the pension payments they are entitled to. It also creates unnecessary administrative costs for pension administrators, who have to hold onto the money indefinitely.

Our plan

This issue is not specific to pensions but is rather a wills and estates matter governed by several statutes. Any change to the way pension assets are distributed when a pension benefit-holder dies without a will would involve an extensive analysis of the law of “intestacy” as a whole and likely require amendments to other pieces of legislation in addition to the Pension Benefits Act. This might increase rather than lower the regulatory burden.

Simplify the mortgage amendment process

Status: No action recommended

What we heard

The process for amending a mortgage in Ontario is very complex. It requires that a new mortgage be drafted and approved every time changes are needed. These rules make it more difficult and costly to update mortgages.

Our plan

The Ministry of Finance recommends taking no government action as contractual terms relating to mortgage renewals are generally dictated by the lender. Issuing a new mortgage when the terms are amended is not a requirement under Ontario’s Mortgage Brokerages, Lenders and Administrators Act, 2006, and the act does not spell out mortgage amendment process requirements.