OSC compliance reviews
The Ontario Securities Commission (OSC) conducts on-site and desk compliance reviews of advisers, exempt market dealers, scholarship plan dealers, and investment fund managers to monitor whether they are complying with Ontario securities law.
An on-site or field compliance review is a general examination of the books, records and documents that are required to be kept by a market participant under section 19 of Ontario’s Securities Act for the purpose of determining whether Ontario securities law is being complied with. The review is conducted by OSC staff at the offices of the firm or individual selected for review.
A compliance desk review or sweep is generally focussed on a specific issue or issues of concern and is completed at OSC offices, by OSC staff, using information provided by a group of selected market participants. No on-site field review is performed and our follow-up on the information provided is limited to written and verbal requests for additional information or clarification of information already provided such as through a survey or questionnaire.
How we select firms for review
The OSC typically uses a risk assessment model to select firms for compliance reviews. We send out a risk assessment questionnaire (see below) periodically to gather information about a firm’s business operations. The information we receive is used to apply a risk ranking to a firm. This allows us to allocate resources more effectively and efficiently by targeting firms with higher risk rankings.
Firms may also be selected for review as a result of any of the following:
- as part of a focus on a particular topic of interest or issue
- if we receive complaints about a firm
- if our compliance review team receives a referral from another OSC branch or regulator
- random review
The Investment Industry Regulatory Organization of Canada (IIROC) conducts compliance reviews of the dealing operations of investment dealers and futures commission merchants. The Mutual Fund Dealers Association of Canada (MFDA)also conducts compliance reviews of the dealing operations of mutual fund dealers. If a firm is registered in multiple categories, it may be subject to a compliance review by both the OSC and the MFDA or IIROC.
If your firm is selected for a compliance review
If your firm has been selected for a compliance review, OSC staff will typically contact you before the review.
We may focus on a particular topic of interest or area of concern, or we may review all the major functional areas of the firm’s operations. In general, we will:
- interview the firm’s senior management and other key employees
- examine the firm’s books and records and financial transactions
- assess the firm’s internal controls, compliance system, disclosure, marketing practices, and policies and procedures
- discuss and issue a deficiency report outlining areas of non-compliance.
The books and records requested during the review will depend on the firm’s category or categories of registration, and the focus or type of review being conducted. Please refer to the following documents for more information:
If your firm is not in compliance
In most cases, firms will receive a deficiency report from the OSC asking that the firm take corrective action to address any instances of non-compliance identified. However, when staff identify that an individual associated with the firm is responsible for material misconduct or serious non-compliance of securities law, OSC staff may take a number of actions, including:
- tracking and monitoring the firm or individual
- conducting a follow-up review
- imposing terms and conditions on registration
- referring the matter to the OSC’s Enforcement Branch
- suspending or revoking the registration of the firm, or certain of it’s individuals.
Terms and conditions may include requiring the firm or individual to provide monthly reporting, imposing restrictions against accepting new clients or new investments from existing clients or requiring the firm to hire a compliance consultant to remediate compliance deficiencies. Before we impose terms and conditions, or suspend or revoke a firm’s registration, the firm may request an opportunity to be heard by the Director.
The OSC issues summary reports annually that include the results of compliance reviews, common deficiencies identified in the reviews and suggested best practices. For more information, please refer to OSC compliance-related reports, staff notices and email notifications.
2020 Risk Assessment Questionnaire (RAQ)
- 2020 RAQ – General Section (for reference purposes only)
- 2020 RAQ – PM & Restricted PM Section (for reference purposes only)
- 2020 RAQ – IFM Section (for reference purposes only)
- 2020 RAQ – EMD & Restricted Dealer Section (for reference purposes only)
- 2020 RAQ – Frequently Asked Questions (FAQs) & User Guide
- 2020 RAQ – Help Page for the General Section
- 2020 RAQ – Help Page for the PM & Restricted PM Section
- 2020 RAQ – Help Page for the IFM Section
- 2020 RAQ – Help Page for the EMD & Restricted Dealer Section
- 2020 RAQ – Spreadsheet for questions G7 & G8 in the General Section in Excel