Managed accounts, marketing in OSC crosshairs

Investment dealers’ separately managed accounts and industry marketing practices will be getting attention from regulators in their compliance exams in the year ahead, according to the Ontario Securities Commission (OSC).

In a report setting out its priorities for the coming year, the OSC’s registration, inspections and examinations (RIE) division indicated that it’ll be continuing to carry out compliance reviews of dealers in cooperation with the Canadian Investment Regulatory Organization (CIRO) — a practice it started last year — with a new target this year.

Staff of both regulators “will continue to work jointly and conduct examinations of a select number of firms where areas of risk have been identified,” the OSC said, adding that it’ll specifically be reviewing separately managed accounts in the year ahead. 

“These examinations will enable RIE, in consultation with our investment management division, and CIRO to identify potential risks, emerging trends and areas for improvement across the sector.”

Additionally, the report noted that the OSC will be carrying out a joint review with the other provincial authorities, targeting the marketing practices of firms that are directly supervised by the provincial regulators. 

“The purpose of the sweep is to assess firms’ marketing practices, both traditional and digital, for compliance with Ontario securities law,” it said.

“Examinations will assess policies and procedures, oversight over marketing activities, performance advertising and disclosures.” 

Depending on the outcome of that review, the regulators may provide added guidance to the industry in this area, the OSC noted.

The report also said that regulators are evaluating the growing prevalence of so-called “ramp-and-dump” schemes and account intrusion activity — with the compliance division specifically assessing the controls that industry firms have adopted to guard against these kinds of threats, and to provide investor protection.

Finally, the report indicated that the RIE division is experimenting with the use of AI to enhance its exam processes.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.