The Ontario government should establish a new organization that would perform the functions currently performed by the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO), an expert advisory panel said in a report released Monday.
The panel recommends that a new Financial Services Regulatory Authority (FSRA) be established, and it should exercise both prudential and market conduct functions. The panel – comprised of George Cooke, James Daw and Lawrence Ritchie – made its recommendation to create FSRA in an interim report released in November, 2015. The final report, dated March 31, was made public Monday and contains 44 recommendations.
The mandate review was partly made necessary with the transfer of responsibility for operating an auto insurance dispute resolution system from FSCO to Ministry of the Attorney General’s Licence Appeal Tribunal on April 1, 2016.
The report suggests that FSRA should consolidate functions, but it should have separate
divisions for the regulation of market conduct; prudential oversight; and pension administration.
These divisions of the regulator should operate in a coordinated manner, but each division
should be insulated from the routine regulatory activities, pressures and resource demands of
FSRA should be a self-funded corporation without share capital,
operationally independent of government, yet accountable to the Legislature through the
Minister of Finance. The FSRA should be outside of the Ontario Public Service and be empowered to hire its personnel from outside of
the Ontario Public Service’s collective agreements, compensation restraints, and other
hiring restraints to support its ability to recruit professionals and industry expertise as it
FSRA should have a skills-based Board of Directors appointed by
the Lieutenant Governor in Council. The Board would oversee FSRA’s operations and the
Board should have the authority to appoint a Chief Executive Officer (CEO). The Board Chair should report directly to the Minister of Finance.
FSRA’s Board should be given authority to make rules that would be enforceable pursuant to
the statute, having a similar authority as Cabinet Regulations.
Auto Insurance Rate Regulation
The panel did not make any recommendations with respect to the prior approval of auto insurance. However, it did recommend that FSRA’s Board should be obliged
and empowered to decide how auto insurance rates are to be regulated and make use of its rule-making authority to scope out a rate approval process.
The view of the panel is that when it comes to the regulation of
automobile insurance rates, FSCO is not ultimately protecting the public interest or enhancing
confidence in the sector.
Motor Vehicle Accident Claims Fund
The panel recommends that responsibility for operating the Motor Vehicle Accident Claims Fund (MVACF) be transferred to the Facility Association (FA), a
non-profit organization funded by automobile insurers in
the provinces and territories that operate private
insurance systems. This responsibility would fit well with
the FA’s original purpose, which is to act as the ‘insurer
of last resort’ for high-risk drivers. The FA already
operates uninsured motorist funds similar to the MVACF
in the Atlantic Provinces.
The panel indicated that the new mandate should require FSRA to utilize its statutory authorities to
adequately, firmly and consistently discourage fraudulent activities or behaviours that
mislead or harm consumers and pension plan beneficiaries.
FSRA should be directed to identify and seek to eliminate gaps in
protection for consumers who might be defrauded by licensed sales agents, brokers and
corporations. FSRA should also have the authority to establish a fraud compensation fund such
as exists in Quebec if or where enhancements to mandatory insurance coverage would not
fully close current gaps.
There is no word from the government on implementing the panel's recommendations.