Draft legislation raises questions

Ontario set to establish single financial services regulator

In early April, the Ontario Ministry of Finance released Establishing a Single Financial Services Regulator: Consultation Draft — draft legislation for the proposed merger of the Ontario Securities Commission (OSC) and the Financial Services Commission of Ontario (FSCO).

It is a move that is of particular interest to the pension industry. If the merger proceeds as planned, the newly created Ontario Financial Services Commission (the commission), will have rule-making powers that will directly impact the insurance and pension industries.

The commission will also oversee a new pension tribunal that will hear appeals from decisions of the superintendent of pensions.

The government first announced its intention to merge OSC and FSCO to form a single financial services regulator in the 2000 provincial budget. The purpose was to “create an effective one-window regulatory process to improve consumer protection and to better serve the financial services sector and its clients.” In September 2000, the Ministry of Finance released a discussion paper for public consultation.

The release of the latest consultation draft, with modifications to proposals from the original discussion paper, suggest several of the concerns raised by industry groups such as the Canadian Bar Association-Ontario, Pension and Benefits Section, the Canadian Institute of Actuaries and the Association of Canadian Pension Management have been seriously considered and acted on. For example:

•Rule-making with respect to pensions will be limited to administrative matters. More substantive issues including surplus, the Pension Guarantee Fund, wind-up and marriage breakdown will continue to be subject to legislation and regulations.

•There will be a separate pension tribunal to hear appeals from the superintendent. The superintendent will be a commission employee and not a member of the pension tribunal. Decisions of the pension tribunal will be appealed directly to the divisional court.

Nevertheless, it is clear that the following more fundamental questions still remain:

•Is the creation of a single financial services regulator appropriate or necessary, given the diversity of interests across the insurance, deposit-taking, pension and securities industries?

•Is there a need for “consumer and investor protection” for pension plan members, particularly those in defined benefit plans?

•Will the new commission be able to deal with pension issues on a more cost-effective and efficient basis than the current FSCO?

•Is the merger an effective use of scarce Ministry of Finance and pension industry resources when substantive issues such as surplus distribution and multi-jurisdictional conflicts remain outstanding?

•Should the regulator that will be enforcing rules be the body that makes the rules?

Comments should be sent to John R. O’Toole, MPP, parliamentary assistant to the Minister of Finance, on or before June 29, 2001. If the Ministry of Finance remains committed to this merger, it is expected that legislation will be tabled in the fall of 2001.

Sheryl Smolkin is a lawyer and director of Watson Wyatt Worldwide’s Canadian Research & Information Centre in Toronto. She can be reached at [email protected]

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