Regulators protect investors by making and enforcing rules for the securities industry in Canada. Learn more about investor protection and securities regulators.
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What organizations protect investors in Canada?
There are two main bodies in Canada that protect investors:
- Provincial and territorial securities regulators
Provincial and territorial securities regulators, such as the Ontario Securities Commission (OSC), administer and enforce rules around how securities are issued, bought, and sold. And these regulators set minimum entry standards for market intermediaries who deal with investors. Securities regulators work together through the Canadian Securities Administrators (CSA).
Securities regulators also regulate marketplaces and clearing agencies, approve individuals and firms for registration based on proficiency and educational requirements and discipline firms and individuals.
The Canadian Investment Regulatory Organization (CIRO) consolidates the operations of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). CIRO is a self-regulatory organization that oversees all investment dealers, mutual fund dealers, and trading activity on Canada’s debt and equity marketplaces. Formerly known as the New Self-Regulatory Organization of Canada.
In Quebec, the Montréal Exchange is also considered an SRO. MX is the only financial derivatives exchange in Canada, and currently lists equity options, options on ETFs, currency options, index derivatives, and interest rate derivatives.
What is the role of securities regulators?
Securities regulators in Canada oversee advisers, dealers, investment fund managers, reporting issuers, and securities markets. The OSC, the securities regulator in Ontario, is an independent Crown corporation that:
- provides protection to investors from unfair, improper, or fraudulent practices and fosters fair and efficient capital markets and confidence in capital markets.
- uses its rulemaking and enforcement powers to help safeguard investors, deter misconduct, and regulate participants in Ontario’s capital markets.
- regulates firms and individuals who sell securities and provide advice in Ontario, as well as public companies, investment funds and marketplaces, such as the Toronto Stock Exchange.
- gets its power from the Securities Act (Ontario) the Commodity Futures Act (Ontario) and certain provisions of the Business Corporations Act (Ontario).
- is funded by fees paid by public companies and intermediaries.
How does regulation protect investors?
There are 5 ways that regulation protects investors:
1. Meeting the standards
Dealers, advisers, and investment fund managers must demonstrate fitness for registration at the time they apply for registration, and they must continue to do so throughout the period that they are registered.
For a firm, fitness for registration is assessed in terms of the firm’s ability to carry out its obligations under securities legislation, including the maintenance of:
- adequate working capital and insurance, books, and records
- robust compliance systems
- procedures for dealing with clients, such as at account opening and in ongoing reporting.
Fitness for registration is assessed through proficiency, integrity, and solvency criteria. For individual representatives, registration means that they have met the minimum standards for education and experience required for their category of registration.
2. Setting the bar
Together with the Canadian Investment Regulatory Organization (CIRO), securities regulators administer, develop, update and enforce the rules for all firms and individuals that operate in Canada’s markets, including public companies, investment funds, intermediaries, dealers, advisers, and investment fund managers.
3. Checking in
Securities regulators, and CIRO, regularly monitor firms, public companies and dealers, investment fund managers or advisers to make sure they’re meeting standards and following the rules.
4. Fair markets
Securities regulators and CIRO oversee all securities marketplaces in Canada, including the Toronto Stock Exchange (TSX) and TSX Venture Exchange. They watch markets closely and monitor compliance with securities law and rules. Public companies must disclose information on a timely basis and in accordance with securities laws.
5. Taking action
If an individual or firm breaks rules of conduct, regulators take action, such as imposing appropriate sanctions or other disciplinary measures to prevent future harm. This could include placing terms and conditions on an individual or firm’s registration or suspending or revoking registration if the firm or individual becomes unfit for registration.
CLEAN SWEEP
Regular compliance reviews are one way the OSC checks whether firms are following securities regulations. Some reviews are targeted inspections, or sweeps, where the regulator focuses on one particular issue or theme, across a sample of registered firms. Findings from sweeps may be used to help OSC better protect investors through guidance and updating rules.
Read how your investments are protected at financial institutions.
Summary
Regulators protect investors by making and enforcing rules for the securities industry in Canada. Two main bodies protect investors in Canada:
- The provincial and territorial securities regulators, such as the Ontario Securities Commission (OSC).
- Canadian Investment Regulatory Organization (CIRO), which consolidates the operations of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).
