More rule-making powers for a new regulator touted in a recent report to take over the duties of the Financial Services Commission of Ontario should give employers “more direction and certainty” when it comes to pensions, a lawyer says.
Andrea Boctor, head of the national pensions and benefits group at Stikeman Elliott LLP, sees several benefits in the changes recommended by a review of Ontario’s financial regulatory system that included a call for a new Financial Services Regulatory Authority to replace FSCO. “The ability for the FSRA to make rules and for the regulator to have some discretion in making rules, I think is also welcome,” she says.
Boctor’s comments follow a final report published recently that built on feedback received after a November 2015 preliminary position paper released as part of the review. In March 2015, the Ontario Ministry of Finance announced a review of the mandates of FSCO and the Deposit Insurance Corp. of Ontario and appointed an expert panel to look into the issue. The panel members included George Cooke, chair of the board of directors of OMERS Administration Corp.; James Dawe, a former Toronto Star personal finance columnist; and Larry Ritchie, a partner at Osler Hoskin & Harcourt LLP. The report’s recommendations concern the broad scope of financial regulation in Ontario, including pension oversight.
The recommendation to replace the Financial Services Commission of Ontario and the Deposit Insurance Corporation of Ontario with a new regulator is an effort to make the regulator “a little bit more standalone” like the Ontario Securities Commission, says Ron Sanderson, director of taxation and pensions at the Canadian Health and Life Insurance Association.
“In the pension sector, I think the concern was: Does [FSCO] have the authority, does it have the power in order to respond quickly to concerns that arise?” he says.
Read: Ontario Budget: Final report on modernization of pension plans to come this spring
The proposals include giving the board of the proposed regulator “rule-making authority” and “consistent enforcement tools” and that it be “provided with powers and tools that would enable it to ensure effective, consistent and timely enforcement.”
Currently, the superintendent of financial services has the power to make regulatory policies that are in line with the 1990 Pension Benefits Act, with no discretion to go beyond what the legislation permits, says Boctor. By giving the authority more rule-making powers, employers will have “more direction and certainty that when they do something in accordance with one of the rules that the FSRA has put forward, that that is the correct way to do it,” she says.
Read: Ontario establishes new body to manage public pensions, investment funds
Additional proposals that could affect pensions include a different structure for the new regulator. The review describes three separate divisions — each with its own superintendent of either market conduct, prudential oversight or pensions — that will work separately but liaise through upper management to avoid being too isolated from one another. In response to questions about the necessity of a separate pension division, the reports cites “the unique character and policy concerns” of the sector.
Sanderson hopes the dedicated departments will be able to better regulate the expanding market for defined contribution pension plans, which he says is “not well-contemplated” in existing legislation and has been “shoehorned” into defined benefit pension statutes.
Read: Ontario DB plan finances ‘improved slightly’ as net deficit hits $27B: FSCO
The report also suggests the new regulator should balance “the interests of all parties” and provide mechanisms to consider plan members and other consumers in policy-making, specifically through a separate office of the consumer to handle those functions. Sanderson believes FSCO has “consulted very effectively with [its] stakeholders” so far and, based on its history of good consultations, believes the recommended expansion in that area is logical.
Overall, the new regulator could be an incremental step up from FSCO, says Sanderson. “There’s nothing revolutionary here from our perspective. This is all moving in a direction that we agree with and support.”
Boctor is also supportive. “The change we are hoping this brings for employers is that with a stronger regulator that has more expertise and talent and rule-making authority, employers will get more direction and more certainty with regards to how they are running their pension plan,” she says. “I think [the changes] are overall good for the industry, a stronger regulator is good for the industries it regulates.”
Read: 2016 Top 100 Pension Funds Report: Solvency reform on the agenda