On May 27, 2024, the AMF published its Annual Statement of Priorities for 2024-2025, which outlines key initiatives for the regulator as part of its 2021-2025 Strategic Plan.
Compliance Burden
The AMF reiterated its commitment to reduce the compliance burden on capital market participants by considering their circumstances, activities and investor risk. Key initiatives include:
- Collaboration with the Canadian Securities Administrators ("CSA") on various projects to simplify or relax the regulatory framework;
- Finalization of prospectus exemptions for qualifying well-known seasoned issuers;
- Modernizing delivery model for prospectuses and certain continuous disclosure documents for investment funds; and
- Finalizing proposed amendments to modernize and clarify continuous disclosure requirements for financial statements, MD&A and annual information form.
It is also signaled that certain disclosure applications required to be completed by financial institutions will instead be replaced with the collection of granular data. This will reduce the handling and aggregation of data by institutions under the AMF's supervision. This pilot project, aiming to leverage the use of data, will first be finalized with a single financial institution, before wider implementation is considered.
Regulatory Framework
As for the prudential regulatory landscape, the AMF focuses on its collaborative work with other regulators and its peers. With the Canadian Council of Insurance Regulators ("CCIR"), it will develop a new regulation to implement the guidance on disclosure of all relevant information related to the total cost and performance of segregated fund investments.
With the CSA, the AMF announced that it will review principal distributors' practices, publish the finding of its review on Regulation 81-105 respecting Mutual Fund Sales Practices, and review the requirements for central counterparty clearing of over-the-counter derivatives to include CORRA and SOFR, which have replaced the previous benchmarks.
The regulator also announced that it will soon be publishing a Guideline on the responsible use of artificial intelligence, which will align with its Best practices for the responsible use of AI in the financial sector document, published in 2024. This Guideline will apply to insurers of persons, damage insurers, financial services cooperatives, trust companies, and saving companies.
Environmental, social and governance ("ESG") issues
As for ESG issues, the AMF confirmed its commitment in line with its priorities in previous years, it will continue to work to publish regulatory proposals to adopt climate-related disclosure requirements based on the standards of the Canadian Sustainability Standards Board ("CSSB"), finalize its proposed amendments to disclosure requirements relating to diversity on Boards and executive positions, and publish and update guidance for investment funds on disclosure practices related to ESG matters.
New climate-related disclosure forms will also be available for financial institutions in order to enable them to better identify and understand climate risk, as well as benefit from material information and improve their climate resilience.
Crypto and Technology
For enforcement activities, the AMF has emphasized its goal of optimizing its detection and market surveillance approaches to counter schemes, including crypto assets and market abuse offences. The AMF has also emphasized its commitment to investing in new technologies and training in order to improve its detection capabilities.
As for crypto assets more broadly, the AMF, in conjunction with the CSA, will continue its efforts to regulate this emerging landscape, as to ensure registration of and granting exemptive relief to crypto assets trading platforms that are subject to securities legislation. The AMF will also work on the Fintech Task Force of the International Organization of Securities Commissions ("IOSCO") on the regulation of crypto-asset markets, AI risk in finance and the adoption of tokenization in the financial markets.
OSC & SEC Priorities
Similarly, the Ontario Securities Commission ("OSC") and the United States Securities and Exchange Commission ("SEC") have also published their priorities1 for 2024. The OSC, like the AMF, has emphasized that some of its most important priorities lie in advancing work on ESG disclosures as well as effective regulation of the emerging crypto markets. In contrast, while the SEC has also signaled that crypto markets remain an important priority, the SEC has not made any reference to ESG disclosure related priorities in its 2024 priorities. This marks a stark difference with its 2023 priorities, where the SEC made ESG disclosures and combatting greenwashing one of its "notable new and significant focus areas"2.
The OSC has made a number of public statements confirming its focus on ESG disclosures, providing an update in March 2024 to the CSA Staff Notice 81-334 regarding ESG-Related Investment Fund Disclosures, which stood out as one of its priorities. As for crypto assets, the OSC notes that it continues to see a broad range of crypto assets offered to clients in Ontario, including retail investors, which are inherently high risk. As such, it will continue its efforts to regulate crypto-trading platforms, and work with CSA and CIRO to bring crypto firms engaging in dealer or marketplace activities into compliance with securities law.
Similarly, the OSC has also noted that a greater reliance on data, analytics and digitally streamlined operation has occurred. Therefore, it will be investing in new technology and infrastructure to enable itself to improve its operational efficiencies and identify trends and emerging risks.
As for the SEC, crypto assets and emerging financial technology continues to be one of its priorities. The regulator has signaled that it will focus on broker-dealers and advisers offering new products and services or employing new practices so that they will continue to meet the demands of compliance and marketing.
Importantly, the SEC emphasized that it will be increasingly monitoring compliance with anti-money laundering ("AML") requirements for market participants, possibly due to the increasing AML investigations and charged by US law enforcement.
Information security and operational resiliency is also at the forefront of the SEC's priorities, with the goal being to prevent interruptions to critical services and to protect investor information, records and assets. The SEC intends to continue its scrutiny of registrants' internal policies and procedures concerning cyber related risks and reporting of cyber incidents. This focus reflects the rising risks of cybersecurity attacks, firms' dispersed operations, intense weather-related events, and geopolitical concerns.
Key Takeaways
The AMF, along with the OSC and the SEC, all put great emphasis on emerging technologies and crypto assets as important regulatory focus for 2024-2025. Although the SEC has not, this year, decided to include ESG as one of its priorities, climate-related disclosure remains an important aspect of the Canadian regulators' focus for the coming year.
Footnotes
1 2024-2025 OSC Statement of Priorities; 2024 Examination Priorities – Division of Examinations
2 2023 Examination Priorities – Division of Examinations
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