When the Ford government failed to go along with
other provinces in banning the toxic DSC fund, it had a profound impact on
confidence in financial markets and their regulation. Some of the unintended
· It showed how special interests can be brought to bear on the Government to the detriment of ordinary citizens
· It alienated other provincial jurisdictions that had thought the OSC was on board with a ban
· The intervention was the likely cause of Maureen Jensen’s early departure as OSC Chair. Ms. Jensen was regarded as an outstanding thought leader in modern securities regulation
· It showed how government can ignore empirical evidence and research in making policy decisions
It showed how the government can blatantly ignore
the voices of financial consumers in reaching decisions.
· It placed an emotional strain on OSC staff who had worked for years on reaching a conclusion to ban the DSC
· It placed the OSC in the uncomfortable position of having to develop restrictions on DSC to limit the damage of the government’s policy decision
· It ignored a 2019, OSC Investor Advisory Panel (IAP) report that found evidence of potential shortfalls in the financial advice Canadians get, particularly those with smaller accounts
· It restrained fair comparisons of lower cost, high quality investment products and services, and discouraged competition and innovation in the Canadian asset-management space
· Some of the proposed restrictions can only work to further marginalize small investors, especially minority investors and seniors. Investors with the least money and/or shorter time horizons have the most to lose
· It exposes Ontarians of modest means to a very bad product that will impair their retirement income security
· The value of academic research and researchers declined
· Independent researchers were intimidated and bullied for supporting a ban
· The professionalism of advice suffered a setback
· It caused the CSA to provide an exemption for DSC on the implementation of CFR conflict of interest rules that will come into effect at the end of June
· It will have a chilling effect on OSC staff contemplating investor protection reforms
· Funding and support for investor advocacy groups declined
· Despite the Ontario government's mandate to reduce bureaucracy and red tape, this does the exact opposite. It creates an elaborate checklist that must be enforced when people purchase DSC mutual funds and one that must be applied by national firms on only a subset of a subset of a subset of Canadians
· It harms the reputation of the entire Canadian mutual fund industry
· Canada’s already low international investor protection stature took a hit.
The decision will also complicate fund disclosure and add to investor confusion. There will now need to be a Fund Facts for Ontario investors and a separate one for the rest of Canada that excludes the DSC material.
It must be very stressful for OSC staff wrestling with the best way to satisfy their government overlord and still look like a normal regulator.
Our message to the Government of Ontario - reverse position and do the right thing for the people, instead of the financial services industry. This would stop wasting precious OSC staff resources on retention of a harmful product and let them focus on their prime objective - investor protection. That would be in the Public interest.