The Private Investor - Fall Winter 2019

OSC Staff Notice 11-784 Burden Reduction and
PCMA Suggestions to Reduce Regulatory Burden
he Unique Business
Model of Exempt
Market Dealers
The private capital markets
are unique and distinct in many ways from
the public capital markets but they are just
as vital and important. PCMA members
vary in size, industry specialization and
geographic scope. Some are issuers. Some
may represent a significant number of
issuers at a time. Exempt market dealers
are transaction based. Clients typically seek
to access private capital market invest-
ments through an exempt market dealer.

A ‘one-size fits’ all approach taken in many rules fails to recognize these differences resulting in excess regulatory burden on exempt market dealers and their clients.

General Comments The PCMA supports the OSC and Ministry of Finance initiative to establish a Burden Reduction Task Force. In particular, we appreciate the recognition that regulatory burden applies to registrants as well as issuers and that disharmony of regulations is identified as a burden to market participants. Regulatory burden has a cost that is ultimately paid by investors and so any effort to reduce regulatory burden ultimately benefits investors.

The PCMA recognizes that the OSC can only
change its own rules and practices but that it
will work with the CSA where a collaborative
response is needed. Similarly, while the OSC
does not have the ability to change Self
Regulatory Organization rules and practices,
it has influence with the other regulators. In
the case of IIROC, the OSC is its principal
regulator, and approves IIROC rules.

Consultation Questions We have grouped our suggestions under the consultation questions. In some cases, our suggestions will apply to more than one question and we cross reference where appropriate. We also offer some commentary on some negative or unintended effects of certain practices and rules.

1. Are there operational or procedural changes that would make market participants’ day-to-day interaction with the OSC easier or less costly?

Late Filing Fees Late filing fees are costly for market participants and there is a belief that there should be a materiality filter especially when it comes to outside business activities. PCMA members have experienced late filing fees for the discontinuance of an outside business activity (OBA) where that activity was an idle holding company. We believe there are two unintended consequences of this practice. Firstly, some dealing representatives have left the industry where they do not wish to pay a $5,000 per year fine for omitting to file a notice for activities such as, participating in a volunteer organization. Secondly, some market participants have not filed information where the OSC is the principle regulator as they know there will be a large late filing fee. This does not happen in jurisdictions that do not levy late filing fees.

Materiality and Timelines While we recognize the issue of filings related to the registration forms is a CSA

matter, we suggest the OSC raise the issue of materiality and timelines with the CSA. In particular, we recommend that some changes should only be done annually. For example, OBAs relating to volunteer and recreational activities where a registrant is not on the board or hold a treasury type position.

Service Standards OSC service standards can be found on the OSC website after some labourious searching. We would suggest that the service standards should be linked with the various services. The OSC should publish its record of meeting its service standards. Many of our members have provided the PCMA with anecdotal evidence of the service standards not being met.

Certain service standards have a financial impact on registrants such as the time to review an application for registration. Every day that an application sits with the OSC costs the registrant in terms of lost income and opportunity costs. Delays in reviewing applications for registration is seen by potential registrants as a lack of understanding or appreciation for their livelihood.

The OSC should also provide a service standard for providing Reports from Compliance Field Reviews. Some PCMA members have experienced delays of 12 months in receiving the exit letter. Although there is an exit interview identifying some deficiencies, waiting months and months for a report leads to a registrant assuming things are fine. The lack of timeliness of the report often results in a