Regulatory Outreach For Financial Filings: Carrot Or The Stick?


Read between the lines of the latest tome from the Ontario Securities Commission (OSC) and its message is clear: "Take a bite out of the carrot we're offering, or risk the sting of the stick we carry." The carrot being dangled in front of Dealers, Portfolio Managers and Investment Fund Managers is a new emphasis on what the OSC calls outreach: online information, special seminars, education programs and a whole lot of cautionary tales now available in greater amounts than ever before. The stick, of course, is the array of penalties at the OSC's disposal should you be found guilty of the most common, or most egregious, filing deficiencies. This warning - or offering - is contained in the rather thick 2013 Annual Summary Report put out by the OSC, which now directly oversees some 1,300 firms that trade or advise in securities or commodity futures. This includes investment fund managers, exempt market dealers, portfolio managers and scholarship plan dealers. While the OSC also registers the 115 mutual fund dealers and 200 investment dealers these firms are principally overseen by their respective self-regulatory organizations being the Mutual Fund Dealers Association (MFDA) and of the Investment Industry Regulatory Organization of Canada (IIROC). The OSC report is not exactly light bedtime reading. But it suggests you might avoid some sleepless nights if you take advantage of the outreach resources the OSC is now offering which include:

A "registrant outreach" web page designed to enhance compliance awareness. Outreach seminars that convey practical knowledge and interpretations of financial reporting and regulatory capital matters, like the OSC seminars that were well attended last September. A new Registrant Resources Section of the OSC designed to provide easy, centralized access to the latest compliance materials. The OSC is also offering some salient advice: it suggests that firms consider engaging an independent consulting or audit firm having the necessary compliance internal audit experience to assist with co-sourcing or outsourcing of an effective sales compliance audit regime. EMDs, especially those with limited time and resources, could likely use the help. EMDs are required to comply with regulatory capital requirements, books and records requirements, and monthly and year end reporting and audit requirements. In other words, they need to have enough money on hand, the right records at their fingertips, the proper timetable for reporting, and the ability to be held accountable without worry. This can seem daunting for firms new to regulation, such as a newly approved registrant. But it can even be challenging for an experienced...

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