The Registration, Inspections and Examinations Division (“RIE”) of the Ontario Securities Commission (“OSC”) has released its 2025 examination priorities, which are informed by the OSC’s 2024-2030 Strategic Plan as well as risk identification from various sources. In 2025, RIE intends to focus on artificial intelligence (“AI”), cybersecurity, financial institution sales practices and know-your-product (“KYP”) practices of exempt market dealers (“EMDs”) in connection with the offering memorandum exemption, while carrying out its expanded examination mandate and remaining proactive in response to new and emerging risks, evolving products and service offerings, market events and investor concerns.
Background
RIE oversees firms and individuals that are in the business of trading in, or advising on, securities or commodity futures as well as firms that manage investment funds in Ontario. RIE’s examination mandate includes firms that seek to become registered with the OSC as well as firms that have been determined to be high-impact and/or high-risk through data collected in the risk assessment questionnaire (RAQ). Firms may, similarly, be selected for an examination relating to a particular issue or topic of interest, or if RIE has received complaints or a referral from another OSC division or regulator. RIE also reviews participation fee and excess working capital filings to ensure that firms are paying their required fees and meeting their capital obligations.
Expanded Examination Mandate
OSC Staff Notice 33-758 2025 Examination Priorities for the Registration, Inspections and Examinations Division (the “Staff Notice”) indicates that, in the upcoming year, RIE will expand its examination mandate to include other regulated entities, such as exchanges, designated rating organizations and clearing agencies, in coordination with the OSC’s Corporate Finance and Trading and Markets Divisions.
RIE’s expanded examination mandate will also include direct examinations of Canadian Investment Regulatory Organization (“CIRO”) member firms. Following the delegation of certain powers and duties to CIRO in March 2025, which we discussed in a previous post, the OSC implemented an enhanced framework of ongoing oversight of the delegated powers and duties and intends to perform risk-based direct compliance examinations of CIRO member firms. According to the Staff Notice, these examinations may consist of co-reviews with CIRO, thematic sweeps (such as those described below), reviews by line of business, desk reviews or comprehensive assessments. RIE intends to work with CIRO to avoid duplication in scheduling, where possible.
Examination Priorities
RIE’s examination priorities for 2025 include:
- AI: The Staff Notice states that registrants are rapidly designing, developing and deploying AI in ways that may affect their compliance with business conduct rules. RIE will examine: (i) the prevalence of AI within registrants’ operations; and (ii) how registrants are responding to CSA Staff Notice and Consultation 11-348 Applicability of Canadian Securities Laws and the Use of Artificial Intelligence Systems in Capital Markets to provide reasonable assurance that firms and individuals acting on their behalf are complying with securities legislation;
- Cybersecurity: According to the Staff Notice, cybersecurity risks associated with registrant businesses, and prudent business practices that firms are expected to establish, continue to evolve. RIE will examine the policies and procedures that registrants have developed to protect against and respond to cybersecurity incidents as well as to protect records, assets and investor information. RIE anticipates that these examinations may identify areas of cybersecurity risk and expects to provide market participants with further guidance;
- Financial institution sales practices: RIE will continue to examine the sales practices within Canadian bank branches in collaboration with CIRO. This initiative followed a public report of potential investor harm due to alleged high-pressure sales practices for mutual funds at some Canadian banks. It is intended to foster an understanding of the sales culture, environment and practices within Canadian bank branches to enable RIE and CIRO to identify and assess the scale of any potential issues and to determine whether further work is needed; and
- Exempt market: RIE will examine EMDs that distribute securities in reliance on the offering memorandum exemption under section 2.9 of National Instrument 45-106 Prospectus Exemptions in collaboration with the OSC’s Corporate Finance Division. In particular, RIE will consider the KYP practices of registrants when distributing securities of issuers that are in default of their reporting obligations under the exemption.
What’s Next?
The Staff Notice highlights OSC resources that are available to assist in preparing for an examination and indicates that RIE will continue to provide resources to registrants, market participants and stakeholders to encourage strong, proactive compliance practices that foster confidence in the capital markets and promote increased investor protection. Such resources include the Registrant Outreach program, the Topical Guide for Registrants and other publications regarding OSC compliance reviews and navigating an OSC compliance review. As part of the OSC’s new operating structure, RIE will also work closely with other OSC divisions and pursue more frequent external communications to prevent and correct problematic practices.
In 2024, the former Compliance and Registrant Regulation Branch (CRR) of the OSC was renamed “RIE”. For more information about RIE, please review the most recent Summary Report for Dealers, Advisers and Investment Fund Managers.
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