The Summary Report was published on July 27 by the Ontario Securities Commission (OSC) and covers a wide range such as educational resources and outreach opportunities, compliance issues, new and proposed rules and other regulatory initiatives.
Key highlights related to registration and compliance deficiencies includes:
Crypto Asset Trading Platform. Common issues concern, amongst others, custody arrangements over clients’ crypto assets, corporate governance structures and compliance structures.
Investment fund managers’ (IFMs) registration. The Summary Report outlines that agreements that restrict an IFM from exercising its standard of care are not drafted in accordance with securities law.
Online adviser limiting available products to clients. Advisers registered in the category of portfolio manager do not comply with their obligations to address material conflicts in the best interest of the client and to make suitability determinations that put the client’s interests first.
Custody. Common issues include (i) instances where a PM does not perform, or adequately perform, reconciliations of clients’ cash and security positions between the PM’s internal system and custodian records; and (ii)client asset records are not maintained in order to perform asset reconciliation.
Registration filings. One of the issues identified is the situation where firm and individual applicants apply for registration, but it is unclear whether they meet the applicable requirements or may require exemptive relief.
The Summary Report is relevant to OSC’s regulated entities including IFMs, portfolio managers and exempt market dealers.