2022 FSRA Exchange Event

2022 FSRA Exchange Event – 02 The Future of Financial Services Regulation, Innovation, and Public Interest – Fireside Chat 

Clare O'Hara:  Hi, Mark.

Mark White:  Ah, and there's my picture. Glen, thanks very much for the introduction. The camera had me worried there for a second but we're -- now we're ready to go. Also like to share my thanks to everybody for coming today. And Clare, it's great to see you. And I wish we could be doing this in person, but I'm really looking forward to your probing questions about FSRA.

Clare O'Hara:  No, thank you for having me. It's great to be here. As you said, even if it's virtual it's great to hear that so many of us have -- have gotten together this morning. We have a lot of ground to cover. But Mark, I thought maybe we could jump into things. And I'd like to give you a couple of minutes just to sort of introduce FSRA. You know, what you personally hear about financial regulation and tell us a bit about what sets FSRA apart from its predecessor? Or predecessors.

Mark White:  Well, sure. Yeah. Thanks, Clare. Well, those are great questions. I'm gonna take them into two pieces because first of all it's personal about why I do this and why I care about financial regulation. And -- and the simple reason is is that it actually makes a difference in the lives of everybody in Ontario. FSRA's goal, our mandate is to protect the public as we work towards financial safety, fairness, and choice for Ontarians. And while much of what we do is unseen, it -- it's a big responsibility.

We regulate sectors that are foundational to everybody's lives. Pension plans, mortgage brokers, life and health and P&C insurance, auto rates, loan and trust companies, credit unions, health service providers. And soon financial planners and advisors. It's -- it's busy. And our responsibility is to promote strong financial services sectors and we take protecting the public interest very seriously while we seek competitive markets and innovation as mentioned by Glen.

And I take this role very seriously. The government launched FSRA in 2019 to be an independent empowered regulator. We have a transfor -- formative mandate and where it enables us to regulate in a way that's open to business, to innovation, but dedicated to consumer protection. And our man -- our mandate has intentionally competing interests, and we have to balance those. And so it's a bold new approach and I think it's an approach that's making a difference. And wherever I go, whoever I mean, and I think about the work that we're doing and the need to act in their best interests, we as -- as -- particularly our -- we care about those who have a position of vulnerability.

You know, Clare, financial services, you know, you report on this. They're complex. And they're changing a lot. And whether it's about the strength of an institution or the fairness of a -- how they're getting services, consumers need somebody there to protect their interests and to -- and to also make sure that the markets can grow and that they can function well.

And so consumers in every corner of the province, they're our clients. We're dedicated to them and they deserve nothing less. And, you know, and that's what keeps me coming back into the office every day. I think you also asked me, didn't you, about -- so, what makes FSRA different than its predecessor --

Clare O'Hara:  -- Right --

Mark White:  -- Do you want me to go into that for a second?

Clare O'Hara:  Yep.

Mark White:  Yeah, cause that's -- so we merged with two predecessor organizations in June 2019 and I think FSRA is a different regulator. And some of it's because of the technical things given to us in the FSRA Act. We have a strong governance model with a great Board of Directors. We have rule making powers where we have a well defined mandate and we're -- been given the powers to regulate the public interests. And because of this we can regulate differently than our predecessors. And this is reflected in our mission. We want to be a dynamic, principles based and outcomes focused regulator that is serving the public interest.

And we also have core values that -- they guide our actions internally and externally: honesty, integrity, credibility, impact, collaboration, and empathy. And we've been in business two and a half to three years. And as a -- in that time I think we've demonstrated that we have an efficient and effective approach to regulation that's proportionate and scalable. It's risk and evidence based.

As Glen mentioned, we're a principles based regulator. We look at the outcomes. We're moving away from proscriptive checklists and a compliance focus. We want to evaluate regulated entities by do they achieve the desired outcomes? This requires an understanding of why we regulate and good judgement both by us and by those we regulate.

And with principles based regulation, entities are expected to understand and achieve the desired outcomes. But they can do so in a way -- and this is the -- this is the great part -- that's suited to their size, nature, complexity of the business, and where they are in the marketplace. It's not one size fits all. So principles based regulation is fundamental in everything we do. In our rules, in our guidance, our regulatory decisions, but it really comes to life in how we supervise the regulated entities. By using principles based regulation we evaluate whether the public good is furthered by their activities.

FSRA -- this also requests FSRA to really be action oriented, and we're building the capacity to actively supervise regulated entities to assess whether those outcomes are achieved and the consumer interests are protected. Internally, of course, this requires significant cultural change, and that also requires cultural change in those who regulate. And this makes our emphasis on communication, collaboration, and transparency all that more important. And you'll hear more about this in the panel on principles based regulation.

Something else that sets us apart, and Glen mentioned this, is innovation as -- and we're gonna have a great panel on that today. Our innovation office, it's there to help both new and existing market participants, helping innovate in a responsible way, a way that protects the public interest and maintains consumer confidence. And earlier this week our innovation office released the innovation framework and we started our first we call Test and Learn Environment for the auto insurance. This will help us validate and assess new and innovative products, services, business models that don't fit within the existing regulatory parameters to see if they can be introduced in Ontario without risk of public harm. And you'll hear more about this in the innovation panel.

So, you know, all these differences I think FSRA is quite -- quite a different organization than our predecessors. But, you know, our transformation's still underway. And I expect as we're guided by the engagement with our stakeholders we're gonna continue to grow and evolve to better serve the needs of our sectors and frankly to assist our sectors in making sure that they fulfill their role, which is providing competitor financial services to meet public demands.

Clare O'Hara:  Great. Well thanks, Mark. I think that gives us a really good opening and -- and an overview of -- of what FSRA is. And as you pointed out, there's a lot of sectors that FSRA covers and I hope we can dive in and get into some of them. I -- I want to jump into a topic that -- that I've covered quite a bit. And -- and so the mutual fund industry is banning DSC mutual funds, deferred sales charges, coming up on June first. And when we jump into the insurance sector, you know, FSRA's regulation of segregated funds, which are somewhat similar to mutual funds, doesn't seem to align with the regulation of mutual funds on a matter of DSCs and cost disclosures. So I'm wondering, do you think these need to be harmonized for better investor outcomes?

Mark White:  Yeah, it's a good question. Well, you know, and -- and as you Clare -- Clare, you of course cover this area and you write on it, so you know. But for those who might not be as close, segregated funds are a form of variable annuity. It's an insurance product but it has investment features. And you're right, very similar to mutual funds. And segregated funds and mutual funds, they can be close substitutes to investors. They're often sold by the same persons and even sponsored by the same fund managers. And so when we're regulating seg funds we think about the competing objectives we have of protecting consumers and core meaning and collaborating with other regulators in Ontario and across Canada.

And for seg funds, similar to you, I think my starting point is that the protections from mutual funds and seg funds should be harmonized unless there's a product or market reason to diverge. Otherwise we're gonna open ourselves to regulatory arbitrage and to unfair consumer outcomes. The Canadian Securities Administrators, as you pointed out, are banning DSCs from mutual funds in June. And because DSCs, they create a back-end cost to exiting an investment then, unless they investment's been held for several years. And this is a varied exit and a cost for investors, particularly for vulnerable individuals that have to exit unexpectedly.

And so FSRA, we're working through the Canadian Council of Insurance Regulators -- I'll call em the CCIR -- to consider is there a basis for distinguishing seg fund DSCs from mutual fund DSCs. And more broadly, how should we con -- think about seg fund sales incentives generally? And we're engaging with stakeholders on this. And so although se -- seg funds are a multi-year insurance product, so there are some differences from mutual funds, it seems hard to justify a back-end sales charge to consumers that need to exit early.

You know, but we are an evidence based regulator. We're committed to consult -- consultation transparency collaboration. And so we want to make sure we have a found facts -- factual foundation, a sound factual foundation for this. And we're gonna get stakeholder input, we're gonna build a CCR consensus, and then we're gonna make a decision.

So I don't have something to announce today. But please stay tuned, cause I think you'll be seeing stuff soon about the appropriateness of seg funding through sales charge. Now a second --

Clare O'Hara:  --And -- and I'm not sure you have the answer --

Mark White:  -- (INAUDIBLE) -- oh, sure.

Clare O'Hara:  Oh, sorry. Go ahead. Go ahead.

Mark White:  Please.

Clare O'Hara:  I -- I was just gonna jump in to ask --

Mark White:  -- I was gonna get to cost disclosure --

Clare O'Hara:  -- And you may not have -- yeah. May not have the -- the answers to this. I just wanted quickly on the -- on the timeline for that, cause as we all know in the mutual fund DSC situation, that took a very long time to get to a ban. So I'm just wondering if maybe you can -- do you have a timeline at all of -- of, you know, where things could move along?

Mark White:  I -- I think you'll see action through the CCIR in -- in parallel with the mutual funds.

Clare O'Hara:  Great.

Mark White:  That's my hope.

Clare O'Hara:  Okay. And then on the --

Mark White:  -- Now you asked about the cost disclosure --

Clare O'Hara:  -- Cost di -- cost disclosure.

Mark White:  Yeah. And so, you know, I think investors seg fund or mutual fund, they're entitled to know what are the costs associated with their investments both direct and indirect. And mutual fund investors, they currently receive disclosures of what distribution cost fees that they incur. And -- and I am sorry to say that segregated fund investors don't receive that. I -- I personally find that difference in disclosure is not acceptable. And I'm hoping that we'll be closing it soon.

But on a bigger picture, CCIR and the CSA we're working together on improving and harmonizing disclosure obligations for mutual funds and segregated funds with a goal of total cost disclosures direct and indirect. And significant progress is being made on this for both products. And we're looking at -- and a matter of fact we've been testing consumer reactions to -- to disclosure prototypes so that we can get a real sense of what will be most useful.

A joint consultation between CCIR and CSA on total cost disclosures, I expect that'll come on the near future and I think CCIR will soon be talking to the sector in a very formal way about the disclosure implements -- elements and their implementation. So I -- I see really good progress on our total cost disclosure fund.

Clare O'Hara:  Great. So we'll certainly stay tuned for -- for some movement on -- on those two things. Jumping over to the mortgage brokering sector, you know, investors lost a lot of money with Fortress. And although times are good right now in real estate, you know, I'm wondering, you know, what has FSRA done to make sure that mortgage investors won't lose money if there are decline in values?

Mark White:  Yeah, great question. And so Fortress involved what we call non-qualified syndicated mortgage investments, NQSMIs. A bit of a mouthful. And -- and those are complex. They're commercial project development financing rather than single family mortgages. Right? So there's a big difference. They're higher risk investment but they can have higher return. And, you know, there's been a focus on this by regulators and the media. And FSRA since our launch we strengthened investor protections at the point of sale and during investment. And frankly what we've -- we've done is we implemented right away that we're getting disclosure materials submitted up front, we're reviewing them to identify and actively supervise against high risk transactions.

We also put out guidance about what are the hallmarks of high risk NQSMIs that is transparent for mortgage brokers and for investors to understand where our concerns lie. And we're also actively monitoring the conduct of mortgage administrators. They're the folks who manage the NQSMIs and are supposed to be protecting the investors' interests. And so with these enhanced supervisory techniques, FSRA's been able to identify high risk NQSMI transactions and deter them and be -- be -- and frankly pre -- stop the sale to unsophisticated retail investors before it happens. We also use this information -- we've identified existing deals that expose investors to risk of loss, and we've been able to proactively and quietly ensure that the outcomes are better managed to get more money back to the investors.

Now importantly we've worked with the ministry and the OSC and we've implemented a new regulatory regime when these complex syndicated mortgages are being sold to less sophisticated retail investors. Those deals have similarities to equity deals and they should have similar investor protection. So we've transferred the responsibility for retail distributions of complex SMIs to the OSC last July. And that makes sure that they're treated on the same basis as other equity type investments. And then we stay in the business of distribution of NQSMIs to sophisticated investors, the sale of qualifying syndicated mortgages, and of course overseeing the administration of all SMIs.

You know, I also want to point out it's not stopping there. We've strengthened our regulation of mortgage administrators who handle mortgages on behalf of investors. They have requirements from approved disclosures. For example, they need to let investors know if events arise which could effect the -- the performance of the mortgage and not wait until bad things happen. We've also reduced regulatory burden by working with government to create a pathway to sophisticated entities to invest in mortgages without the protections that were intended for less sophisticated retail investors. And we're working with the government to implement its MBLAA review recommendations. Including a separate class of mortgage broker licensing for private lending so that we'll have a more efficient market and will better protect consumer outcomes.

You know, I think what we've done in the -- in this area actually shows that we're an effective regulator and we're proactively engaged dealing with a, you know, a problem that has been in the market for quite a while.

Clare O'Hara:  What's the timeline around the new classes for the mortgage brokers that you -- that you just mentioned?

Mark White:  Yeah, it's -- it's -- it should be happening -- really there'll be a transitional period over the next couple of years. But this is something that has really happened real time. And -- and frankly it's very important to do that because private lending is a different type of transaction, and this was identified in the MBLAA review by the government. And so we want to make sure that this new private lending class, it's there because you want to better protect the consumers and the investors who are engaged in that. And so we're gonna have to have a transitional path where people who are already in the marketplace where they have a chance to get this accreditation and then we'll have higher entry standards for new entrants who want to come in and work in the private lending market.

And so it won't affect people who are doing the more traditional vanilla mortgages. Those mortgage brokers just -- and agents can just continue with business as normal. And for those who want to engage in this more complex private lending, yeah, there's gonna be a little bit of extra burden for them. But, you know, we're -- we're really pleased with the response. The whole profession has been very supportive of this. They realize that that extra recognition of private lending as a distinct category of services is important to them and important to both the consumers and the investor (INAUDIBLE).

Clare O'Hara:  Great. I see a lot of questions coming -- coming in to our Q&A and I just want to remind everyone they are able to -- to message in your questions. We're gonna try to get to them at the end. And -- and I can see them popping up so we'll -- we'll definitely jump over those later in this session.

So -- so jumping into a -- another area that -- that I've covered as well is on financial planners and advisors. You know, a lot of people, myself included, but a lot of financial firms have -- in the country have been watching Ontario around the regulation of individuals who are using the titles of Financial Planner and Financial Advisor. And earlier this month FSRA did send the final rule proposal to the Minister of Finance for approval. So I -- I want to sort of reach out and as you, you know, is the -- is this Financial Planner and Advisor title protection framework it, you know, it covers a lot of people who are already regulated in the industry. So with this new rule is it going to cause additional burden on the industry? Is it gonna be duplicate oversight for advisors? And secondly, you know, why aren't the SROs like the MFDA and IIROC being given exemptions for the -- the duplication?

Mark White:  Yeah. Great -- great question, Clare. You know, to step back just a little bit, right now in Ontario anyone regardless of their skills and without being subject to supervision can offer themself to the public as a financial advisor or planner.

It's not reasonable to expect consumers to distinguish between qual -- qualified and well supervised finance professionals and those who aren't. You know, we wouldn't expect consumers to evaluate medical doctors or other regulated professions on their own. It's a longstanding consumer problem and this government has tried to address it through the Financial Professionals Title Protection Act. And so it's been given to FSRA as a principles based outcome focused regulator to work to achieve this act's objectives. Reduce consumer confusion over titles and improve consumer protections by creating minimum standards that is -- for these titles.

And to achieve that objectives(PH) we want to make sure that this consistent minimum standards around things like who's qualified, their conduct, how they're supervised, and what discipline they're subject to. And so to achieve this regulation but still to minimize burden, FSRA -- FSRA's implementation will leverage existing frameworks for licensing and designating bodies for financial professionals.

We're going to reuse the existing license and designation, and that avoids creating a new requirement for professionals who are within one of these approved credentialing bodies. The contemplation is there's gonna be several licensing and designation -- designating entities that are to come forth and be credentialing bodies. Those bodies have to apply. If those entities apply to become a credentialing body, and they'll get approvals that their licenses or designations will grant the right of title use. And once they're approved they're financial service professionals. They can use the titles which are approved without any disruption and without any new regulator supervising their activities. Cause they're already subject to the supervision of these designation of licensing entities.

And so when I look at this I think this actually is a simple solution. And it leverages existing regimes. And because of that there's no need to grant exemptions, because if an existing licensing or designation granting entity wants to have its people use the title it just needs to come and apply to be a credentialing body.

If -- and the reason for that, we want to make sure everybody is inside is that's how you get consistent standards for key requirements such as education, codes of conduct, supervision, complaints, discipline. And you also want to make sure that -- cause now we're gonna have multiple ways that someone can get the right to use the title -- we want to make sure that title users who fail in those minimum requirements are held accountable and that the public will be protected from them going to another source of using the title and going to market.

Now if we granted exemptions we wouldn't get that consistent minimum standards that are associated with the right to title use and the ability to make sure that title users who don't meet standards cease activity and that we can protect the consumers. So we've submitted the rules as you mentioned to the Minister's office. I know there's many competing priorities and objectives, time is scarce, but, you know, I'm optimistic that FSRA will soon have the opportunity to implement this important public protection.

Clare O'Hara:  And -- and -- and just to finalize, is the -- the credentialing bodies have -- have they been a -- approved? Or is this something that will come after the Minister's approval that we'll then hear about who is going to be the -- the credentialing bodies for these titles?

Mark White:  Well until the -- the legislation is enforced and our rules are -- we don't actually have, you know, we have the ability to certainly do some preparatory work for the legislation coming in, but we can't approve credentialing bodies really until we actually have that legal frame to do it. But I am pleased to say that there are several entities that are already in active discussions with us about their applications. And so, you know, we think that this is gonna be real and people are gonna be ready to go, you know, hopefully later this spring.

Clare O'Hara:  Great. And -- and just to -- to follow up with that, to keep it the best investor protection standard is there a fiduciary standard for financial planners and advisors under this new framework?

Mark White:  That's a great question. I mean, the -- the -- the regime as I talked about, it gives FSRA the power to oversee the credentialing bodies. FSRA does not become the regulator of conduct of the title users. And that's because we want to avoid a duplicate regulatory regime and additional burden. But, you know, the -- that actually works because these people are already subject to oversight. And so what we're trying to do is to make sure that they will have consistent regulation across all the title users by having those minimum standards.

And so because this isn't a vehicle for FSRA to impose new conduct standards which go beyond the existing norms established by securities regulators, what we're doing is we're making sure that there's a requirement -- a flexible requirement, and our proposed rules have this -- that if you want to be a credentialing body and you want your people who you approve to be able to use the titles, you're gonna have to meet certain requirements. Title users will have to deal with requirements -- this is right in our rule -- competently, professionally, fairly, honestly, and in good faith.

There'll be a requirement for codes of ethics, professional standards, and education requirements. And there's also a requirement for effective processes to deal with complaints and to discipline title users. And so this will allow us to reflect the existing consensus of security regulators on what is the fair treatment of clients and make sure that all the people who use the title will be subject to that minimum standard. And the great thing is, Clare, if securities regulators evolve, for example, that they go to a full fiduciary standard at some point in time, we'll then have the flexibility through this framework we've created to elevate the requirements for the credentialing bodies so that then all the titles -- title users will have to follow that new standard as well.

So I think this really is a good, flexible regime that will put the -- the minimum protections across and evolve as securities regulators want this to evolve.

Clare O'Hara:  Great. So -- so jumping over to another sector that FSRA covers is under credit unions. And -- and obviously one of the larger regulatory issues that arose in this sector was around PACE Credit Union. You know, PACE Credit Union has been in administration since 2018 due to failed governance, mismanagement, and misconduct by its former leadership primarily related to new business activities. So -- so I'm wondering two things here. You know, the government does have a pending credit union act, the CUCPA 2020, that is gonna give credit unions even more room for business growth. So -- so one, I'm wondering if you can give us an update on where things stand with PACE Credit Union. And secondly, is FSRA comfortable with the credit unions having this additional flexibility? You know, how are you going to safeguard for similar occurrences happening in the future?

So maybe you can jump off with PACE, cause I threw a few questions at you.

Mark White:  Yeah. So -- so PACE, that's a quick one. So PACE Credit Union, it continues operations and it's serving its members' interests. I can't comment -- there are continuing litigation matters. And I also can't comment on strategic alternatives which may be under consideration. But I am pleased to note late last year there was successful resolution to the claims by PACE members concerning the securities distributed by it's now insolvent subsidiary PACE Securities Corporation. So that's important progress on that.

As to your larger question, so about opportunities for credit union growth, it is -- I always go back to our mandate. Our general mandate about -- includes fostering strong, sustainable, competitive, and innovative financial services sectors. And our credit union mandate says we have to contribute to the stability of the sector by considering the need for credit unions to compete effectively and take reasonable risks.

We have a role therefore in managing prudent growth, and I have considered the CUCPA 2020 and the additional opportunities for new business and investments. With this flexibility credit unions may expose themselves to additional risks. And that's why we've developed proposed new rules on sound business and financial practices, capital adequacy, and liquidity reporting and adequacy.

These news -- new rules, they're principles based and outcome focused and they set requirements that will re -- that will mean credit unions will have enhanced risk management and governance practices. Practices more closely aligned with international best practices and very importantly practices that equip credit unions to prudently expand their businesses and to manage new risks. Credit unions will only be permitted by us to take on new business investment activities if they can show the risks are prudently managed. In reviewing the proposed activities, we'll assess whether the credit union has strong enough risk management capabilities to effectively identify, evaluate, monitor, and mitigate significant risks.

You know, also over the next year we're putting in place a new risk based supervisory framework for credit unions. This is a new approach. It includes our new risk data initiative and it'll enable us to focus on the areas of highest risk in individual institutions so we can better understand the risk profile of credit unions so they can identify issue of concerns and deal with them proactively.

So overall, you know, given the increasingly sophistication of credit unions and these new frameworks for managing and supervising risks, and given the need for credit union to serve their members and to offer choice in financial services, I’m confident that it's prudent to move forward.

Clare O'Hara:  I -- I think another area just to touch on with credit unions is right now, you know, they're -- they are heavily exposed to residential mortgages and FRSA -- FSRA put out mortgage guidance that some are saying is -- is easier on credit unions and off-seas B20 guidance to the banks. So are you concerned that credit unions are overexposed to residential mortgages? And -- and will you regret being more lenient if housing prices start to decline?

Mark White:  You know, the protection of credit union members' deposits and the stability of the sector and high standards of business conduct are all things that we care about as part of our mandate. And you're right. Residential mortgage lending, it's more than half of the credit union loans. So it's really important that there's prudent practices and procedures to manage that risk. And it's also important that borrowers be well equipped to take on the debts they incur. That's part of conduct.

And so our residential mortgage lending guidance you mentioned, released a year ago, it carefully balances enabling credit unions to earn returns, meeting their members' home purchasing needs, and ensuring that members, depositors, borrowers, and the credit unions are not put at unnecessary risk. This guidance is principles based as opposed to some more proscriptive approaches that have been adopted in other jurisdictions.

This considers that credit unions exist to serve their members. They're not there to generate a profit for shareholders so there's a greater alignment of interest. And credit unions have close ties with their community, and they should have superior knowledge of their members. So we have a diverse credit union sector. Some are quite large and some are, you know, more limited and serving a more focused community. And so a one size fits all approach, it's not optimal.

A principles based approach sets out the desired outcomes and requires good processes customized as opposed to specific thresholds and metrics. This enables credit unions to determine the most effective means of achieving these outcomes. And it avoids arbitrary thresholds and metrics that may not be situationally appropriate. So let me give you an example. When assessing der -- debt service coverage -- now that's an important aspect of lending -- rather than applying a specific debt service stress test that credit unions uniformly apply and say yes or no, we expect credit unions to determine and to be able to explain to us what are the appropriate debt service levels to protect the credit union against loss and also to protect the -- its borrowers against being financially overextended.

I think this regulation of residential mortgage lending, it should permit credit unions to serve their members well, to compete effectively, and to take reasonable risks. And given its importance though we of course will continue to proactively monitor the mortgage lending processes and risks. But after years' experience, you know, I can say that I'm comfortable with this lending activity in credit unions.

Clare O'Hara:  Great. Thank -- thanks for your answer. I feel like we could probably spend a whole lot of time on credit unions. But unfortunately with our time we're -- we're gonna jump over to the auto insurance sector. Clearly an area that is a hot topic with many Canadians. It affects 10 million consumers that are required to purchase this product in order to drive on the roads. And during the pandemic there's been a -- reports of windfall profits by auto insurers in Ontario. So what is FSRA doing, you know, during the pandemic as this virus continues on to protect the consumers from these unreasonably high rates?

Mark White:  Well, you know, we closely monitor what drives auto insurance costs. And frankly we report -- now we've added public reporting on how cost benchmarks, the drivers of costs and rates, are changing.

     And so during the pandemic you're right. There was an unprecedented drop in the number of collisions and claims partly offset by some increased accident severity. And as rates are always set on a forward-looking basis these lower costs resulted in higher than usual auto profits in 2020. And this may continue in 2021. Now FSRA observed this trend while it was happening and we took action. We established a use and file emergency rate reduction framework in 2020 to enable auto insurers to voluntarily and quickly provide consumers with immediate rate reductions. We also used existing regulatory tools to support relief and worked with government to confirm that non-discriminatory rate rebates could be used to provide consumer relief.

FSRA also on the other side was actively engaged with insurers to asset -- to assess what consumer relief should reasonably be available by each insurer, and we work to encourage insurers to provide and maintain rate reductions and other consumer relief.

Now using all these pathways, insurers made more than a billion dollars in consumer relief avail -- available through rate reductions, rebates, and other means. And, you know, as rates are also set prospectively, policy holders who renew at a lower emergency rate continued to pay that lower rate for the balance of their term.

So ha -- profits may be high, that's a valid opinion. But at FSRA, we don't approve or regulate profits. We approve rate filings based on historical data and when ap -- we give the approval then insurers can use that to set rates for future years. Now we do have guidelines. They permit insurers to include up to a five percent profit provision in their pricing. But the actual profit, which is the commendable windfall, is a function of profit and loss. And the truth is ultimate costs won't really be known for several years because of the nature of injury claims.

Finally, you know, while this trend may not continue indefinitely, you know, I'm very pleased that it has been widely reported from multiple sources that Ontario insurance rates declined materially in 2021 including declines on average across the province and in many big markets like Toronto and Brampton.

Clare O'Hara:  The -- another topic in -- in the auto insurance sector is around consumers who can be harmed by insurers who are not offering contracts to eligible consumers. And I know you sort of mentioned in your opening around some things in the auto sector. But, you know, consumers can be hurt if there's arbitrary underwriting rules such as a postal code that can impact them and it increases the price without really reflecting risk.

So, you know, what is FSRA doing to ensure fair treatment of consumers when they're -- when they're shopping around for their auto insurance?

Mark White:  Yeah, a great question, Clare. And auto is always of course a, you know, it hits everyone who is at -- you know, over 10 million people have auto policies. So it hits us all. And, you know, we are committed to strong consumer protections related to auto insurance. We want to make sure that insurance is available to eligible consumers, that rates are just and reasonable, and that underwriting rules are fairly applied.

You know, we monitor complaints closely. We look at market practices, and we try and identify is there consumer harm going on? If so we want it remedied and if not we will take enforcement action. So, when you refer to predictor practice which we identified in the marketplace through surveillance and targeted examinations and it -- and we observed that insurers and their distribution representatives may not be honoring their obligation to offer auto insurance to all eligible consumers at the lowest available rate. This obligation is called the take all comers rule.

Now this is a hidden harm. Because consumers are likely not aware that -- that there was an absence of a quote from an insurer that may have given them the benefit of a lower rate. It's an example of how FSRA has to be that voice for consumers where they can't see what's going on because of lack of transparency. For example, insurers -- there's examples of them not offering coverage to -- to renewal customers, to auto only customers where they don't have home included, to consumers who had an accident, to consumers resident in certain locations, or to consumers that just have short histories of obtaining insurance.

Another example of the breach of the take all comers rule is -- is withdrawal of authority from -- from brokers and agents. And then the insurers not responding with a quote on a timely basis on its own. So of course the insurer -- the customer then just goes off and chooses from the quotes that are on the table. On November 15th last year we issued take all comers guidance. We reiterated that auto insurers are required by law to provide all Ontario consumers with timely auto insurance quotes and the lowest quotes available to them.

This includes the obligation to accept all business that meets the insurer's FSRA approved underwriting criteria. And while some of these breaches, you know, may have been inadvertent or an attempt to reduce insurance fraud, which is an issue, FSRA is actively supervising insurers on this issue. We're requiring them to review their practices. We're requiring them to report on this review later in 22, and to establish remediation plans for any practices where there are breaches.

Now with respect to the -- you also asked about auto insurance rating territories and the use of postal codes is part of that. Now this has actually been in the law for years, and insurers are required to set rates using territories. Traditional rate setting requires objective factual criteria such as geographic location so that you can distinguish between risks based on claims experience. My suggestion for consumers who believe that their driving behavior justifies a lower rate and that they're getting a higher rate just because of some of those factors like geographic location, I urge them to look at user -- user based insurance, we call it UBI.

UBI is offered by quite a few insurers now. It uses modern technology to access actual driving behaviors, not just based upon criteria which you fit into different pigeonholes. And then it adjusts your rates accordingly based on your actual driving behavior. It's also important from a safety point of view because drivers learn more about unsafe driving practices. You know, we're -- this is all part of a bigger topic. We recently released guidance to auto insurance companies. We want them to be aware of how we want them to approach rating and underwriting errors, the need to identify and to resolve those errors, and importantly to remediate any consumer harm.

The final thing I'll mention is, you know, our work to protect insurance consumers that are taking up one more level, it includes the proposed principles based and outcomes focused rule on unfair and deceptive acts and practices. Once in place this rule will better equip FSRA so that we could protect insurers from a broad range of unfair conduct.

Clare O'Hara:  So -- so just on -- on the UBI with the -- with the drivers, I just wanted to ask -- so is that something drivers have to ask the -- the auto insurance for themselves or do they have to sort of seek it out online? Or is it just they have to go to their insurance companies and say they -- they want to adjust their rate with this technology?

Mark White:  Yes, it's -- it's a different form of policy so that your rate reset. And you -- and I -- in many of them you actually, you know, they'll get experience and, you know, it's -- it's -- it's -- some I think use devices in your car or some I believe can actually even use your own cell phone. And it measures your actual driving behaviors. And so that's why I say it has great safety benefits cause you can learn the things you're doing that actually may be, you know, exposing you to unnecessary -- you and your family to risk as, you know, it -- of course the insurance is important to protect against financial loss. But really, the most important thing we should all be seeking to do is to reduce the harm that happens on the road from unsafe driving.

Clare O'Hara:  Great. I -- I'm just gonna jump over to one of our audience questions, cause I see it sort of pop up on my screen and it has to do with the auto insurance sector so I figure why not pop it into -- to when we're on the topic. But someone, you know, Mark, you mentioned balancing competing interests in your opening remarks. Could you expand on how FSRA does this, say for example in the auto insurance sector.

Mark White:  I'm sorry, balancing competing risks in the auto insurance sector?

Clare O'Hara:  Right.

Mark White:  Yeah. Well, you know, it -- you know, it's -- it's in several different respects. So we have a mandate to protect consumers from unfair business practices. And so we are constantly looking at that. And so there's a sort of a whole area of conduct regulation to protect auto insurance consumers. Importantly, you know, we're not a -- a complaints resolution bureau where if someone has a problem with their contract -- sometimes there are contractual disputes which need to go through ombudsperson processes and we look at those though, the complaints, to try and understand are there patterns of behavior? Ultimately as a, you know, risk based regulator we want to actually understand what are the processes within insurers and in their distribution channels that either protect in -- consumers from unfair outcomes or are resulting in practices that result in unfair outcomes.

So that's on the conduct side. On the rate setting side where we -- you know, we approve rates when they -- when a insurer wants a change, and we look at their underwriting criteria. There there are legislative standards just in reasonable rates. There are underwriting criteria which are approved. And so then we basically look at rate filings and underwriting criteria applications and we make sure that we're balancing those interests.

So overall both from the conduct side and on the auto rate side we're constantly trying to find what is the right balance from having a competitive, strong, sustainable auto insurance and P&C insurance sector while making sure that we're protecting those legitimate consumer public interests.

Clare O'Hara:  Great. So jumping over to pensions, you know, again another sector -- as we mentioned in the beginning of this discussion there's a lot of different sectors that FSRA oversees and pensions is one of the last ones we're gonna touch upon. But, you know, pensioners have lost a lot of money through underfunded single employer pension plans with failed sponsors like Nortel or Sears. So other than relying on the pension benefits guaranteed fund to mutualize losses with strong pension plans, you know, what is FSRA doing to protect pensioners in -- from losses if their employer fails in those single employer plans?

Mark White:  Yeah. Yeah that's a great question. And it's right in our mandate, again, we're required to protect the rights and benefits of pension plan members. And that means more than relying on the PPGF to top up benefits if a plan's insolvent.

Members in a underfunded single employer pension plan become creditors in their employee's insolvency. And our goal is to protect their interests before the insolvency occurs. We observe that there are poor outcomes for plan members when they're underfunded and their employer is insolvent. Because of this we implemented our actively monitored supervisory approach almost two years ago. This active monitoring focuses on pension plans where we're concerned about the security of the pension promise due to some combination of underfunding and the employer's financial weakness. We utilize predictive tools, things I learned at OSFI, to conduct a quarterly risk assessment of all PBGF eligible plans including plan funding, employer financial health, proposed transactions, you know, things that might expose plan members as unsecured creditors to a loss if there's an insolvency.

And so these plans are subjected to enhanced supervision and engagement. We have a specialized team at FSRA that does this active monitoring. A key part of this is engaging with direct discussions and reminding pension plan administrators such as the employer's board of directors that they have a fiduciary obligation, a high standard to protect the interests of the plan beneficiaries.

So while, you know, our actively monitored work, these meetings are highly confidential, we've seen positive results with planned fiduciaries taking steps in several companies to reduce the risk to pension plan beneficiaries. They've done things like improve their governance, increase the plan funding, advance de-risking strategies and used more conservative assumptions in assessing whether the plan members were at risk.

And, you know, while there will be underfunded plans and insolvent employers in the future, we're -- we're not gonna be able to stop that -- this is a great example how FSRA has quietly and proactively used our guidance and our supervisory tools to improve outcomes for the people in Ontario.

Clare O'Hara:  Great. And just following up on that with jointly sponsored pension plans, you know, they're also a huge part of retirement security, you know, what's FSRA doing to make sure that they're well managed and that the -- those investments are sound at the same time?

Mark White:  Yeah, I mean, those large public sector plans, you know, they are a very important piece of what we have going on in Huron and Ontario. And they're very large. The largest one is about half a trillion dollars in assets they manage or 60% of the pension plan assets in Ontario. 1.6 million people depend on them for financial security. And going back to our mandate, I already mentioned that our -- we protect the rates and benefits of plan members and that these plans sometimes add flexibility to what those benefits are. And solvency doesn't tend to be a big risk cause they can often adjust benefits through (INAUDIBLE) inflation indexing for example.

But our mandate also requires us to promote good administration of pension plan. And that's an obligation that we take seriously with these large public sector plans. You know, they're sophisticated investors. You know, they're among the largest institutional investors in the world in some cases. They transact globally and they are very innovative in their investments.

And so while I don't have any specific concerns to share about our DSPPs, our public sector plans, we're mindful that even large and apparently well managed asset pools, you know, with the example of AIMCo in Alberta in the last few years is an example. They can have breakdowns in their risk management and governance that cause material investment losses. So we have been engaging our six largest public sector plans since our launch to understand their investment and risk management practices in targeted areas.

We looked at their alternative asset risk management, we surveyed their practices, we compared them, and we released a report in 2021 on our findings. And we now have a benchmark to supervise in this area more actively. And we're also piloting a liquidity coverage ratio. And this will give transparency and consistency on reporting and liquidity risk management. We'll get a better understanding of their liquidity risks and how they're affected by different investment strategies. And this can serve as a basis for stress testing, which is really important.

We're also now starting to look at the broader investment risk management in governance practices. Now while these plans have their own well developed investment risk management in governance practices. Now while these plans have their own well developed investment risk management governance processes and controls, we want to look across them to form a view on best practices. We want to be able to identify ultimately whether we think a particular plan has good administration of its plan assets.

Now it's a short time we've been launched. This is complicated. But I think we've come a long way. We still have a long way to go. And -- but I do think that we're on the path to reaching a more mature state where we can better supervise these large public sector plans.

Clare O'Hara:  All right. So -- so pension plans, a lot of conversation has also been around, like, climate change and ESG and -- and so where does FSRA come down on what pension plans should be doing to respond to the risks of climate change?

Mark White:  You -- you know, awareness among the institutional investors has definitely accelerated about ESG, particularly the climate. Because it affects investment risks and opportunities. And pension plans, you know, the JSPPs but all of the single employer pensions, even the multi-employer pension plans, this is an important part of their standard of care that they have. They have a prudent investment investor obligation. And the plans and their fiduciaries, you know, they have an obligation, I think they know this, to ensure all risk and return factors are considered when looking at investment strategies.

And so climate change specifically, you know, any ESG generally, they have to consider these risks. And we expect plans to look at these broader risks as part of their good administration obligation. It's part of protecting the plan assets that will fund the pensions. Now, given the long term nature of pension obligations and pension investments, climate change risk is a particularly heightened risk for pensions when you compare to other funds with a shorter prospective.

Now pension plan risk from a climate perspective is a derived risk. Plans don't produce a lot of carbon but they do invest in many businesses and activities that can contribute to global warming. They also have the opportunity to invest in businesses that could help alleviate global warming. And this means that plans need to have -- because it's a derived risk -- they need to have good reliable and consistent information on the carbon impact of different investments. Initiatives such as the federal taskforce on climate related financial disclosures and the work that's going on by securities regulation -- reg -- regulators about disclosures, those are very important because that's how pension plans will be able to understand and manage this risk, and potentially be a force to help us towards a greener future.

We're also engaged with the cross Canada CAPSA committee of -- of -- association of pension supervisors. We're developing ESG guidance. We're working on that actively. And I -- I'm hopeful that there'll be draft guidance later this year which would be released for consultation so that everyone can see the thinking of all the leading pension administrators in the country.

Clare O'Hara:  Great. So I'm gonna jump over to -- to some of our questions that are coming in and -- and as I'm scrolling through there's quite a few in there. So forgive me if I don't get to all of the questions that we have. And then we'll jump back to -- to a couple other questions that we have as well. But -- so -- so right now it says what steps has FSRA taken to protect both public and private investors in the private mortgage space? So both public and single private investors in the private mortgage space.

Mark White:  So I'm -- I'm not quite understanding public investors in the private mortgage space. I certainly understand single or private. So maybe what they mean is public in the sense of a pub -- more public distribution where there's multiple investors.

So, you know, I go back to there's two big streams here. There's the non-qualifying syndicating mortgage investments and there I've already talked about that we've done everything from proactive disclosures and then we look at those substantively. We've identified one of the high risks in a non-qualifying syndicated mortgage investments and we proactively then managed those offerings when they're in the marketplace, and we've also went out and worked where we've identified higher risk existing transactions to deal with the mortgage administrators to make sure that they are better managed for outcomes.

So that's, you know, the non-qualifying, you know, we have the securities commission for true retail offerings where now they'll get the full protection of securities regulation. So I think on the non-qualifying syndicated mortgage investments we're really in a much better place than we were two or three years ago. There are also a whole area of private lending and because financial institutions -- because some of their requirements right now it can be hard and high house prices, it's hard for people to get mortgages. So there is more and more activity where individuals are going to private lending alternatives.

And the question I believe was about the investors in those private mortgages. And so there -- yes, there are requirements. I -- I've -- I mentioned how we're actually going to credentialize(PH) and require a higher education and qualification level so that the people in mortgage brokerages who are putting these deals together, that they have enhanced knowledge and skills. We're also, as I mentioned, looking at mortgage administrators and we're -- we're actively working to make sure that mortgage administrators understand their obligation, cause they essentially manage those investments on behalf of the investors during the term.

And finally, you know, we're working with mortgage brokerages particularly where we have these private lending transactions and they're being, you know, sold individually or sold in groups or bundles to private investors, those mortgage brokers have both an obligation to the borrowers who they're trying to get money for but also their investors. And that includes very importantly making sure that it's a suitable investment for the individuals who are investing in those private mortgages.

Clare O'Hara:  Great. And another question that came in, and they're not specific to when they say brokers but I think they're talking about the auto sector. So it says here will FSRA also investigate insurers canceling contracts with brokers? Because the brokers are quoting and writing policies for clients that the insurers don't want.

Mark White:  Yes. This -- this is part or the whole take all comers issue. So, you know, it -- it -- if a insurer is using its market power, let's say because the broker is basically saying no, I need to give a quote to this customer, and the insurer preferences that they already have too much business from a customer in that geography or with that profile and they don't want that quote to be given, that would be an improper practice for an insurer to use its market power and to cancel its brokerage arrangement because the broker is actually doing its job of trying to obtain the quotes and provide them to a consumer.

So that is an example of a potential take all comer breach that we are expecting insurers to review their practices for. You know, and obviously the -- there may be anecdotal issues we're aware of. And of course sometimes the facts can be very complicated on a particular case because maybe the broker feels it's because they were trying to provide quotes the insurer didn't want, maybe the insurer has a different perspective that the brokerage was not doing something else which was required under the terms of their arrangement.

But what we look for more importantly than those individual anecdotes and, you know, contractual problems, we're looking for patterns. And we're looking for are insurers, are the distribution channels functioning properly? Do they have good controls and processes in place so that important consumer protection rules like take all comers are actually honored in practice and -- and because you actually have systems and controls to make sure that those are put in place. So a very important question raised.

Clare O'Hara:  Great. We're just gonna jump back to this segregated funds topic. You know, so -- so we talked about the will it be similar to DSC funds. The other big thing that's happening in the mutual fund in -- industry is client focused reforms. So is FSRA considering new market conduct standards for selling segregated funds similar to the client focused reforms that's happening in the securities industry?

Mark White:  Yeah, I -- a great question. You know, we do actually care greatly about what goes on in securities and we always look at that. Securities regulation is, you know, a very important part of the marketplace. And we always have to be careful that we don't just try to adopt what happens in the securities realm with segregated funds. Because they are of course a -- a different product.

And so the CCIR since frankly before FSRA was even launched was working on this -- in this area. And so there's good work from 2017, 2018. And we're not only want to build on that but we're actually looking at the insurance distribution channels including the role managing general agents. And we're actually building supervisory capability about the life agents and how they deal with consumers on behalf of -- of the -- the -- the insurers who create the products.

And so our goal, we share this with the CCIR and some self-regulatory organizations, we want to have principles based guidance that has clear expectations for insurers and their intermediaries that will cover the segregated funds throughout their life cycle. And then we want to be able to proactively supervise against that.

And so, as I said, we look at the client focused reforms. They're not completely applicable to insurance because of product differences, but the goal is the same. It's about fair treatment. And so we want to make sure that insurance consumers are treated fairly when they invest in seg funds and the -- that it starts with how the products are developed, how it goes through the sale process, and then how it's managed through the whole product life cycle.

It's very important, though, you know, and one of our objectives is collaboration with other regulators. We want to have harmonized rules for insurance products across Canada wherever possible. It would be burdensome to insurers and distribute -- distributors to have provincial variations. And it's -- would also be confusing to consumers who won't understand the differences cause they can be quite nuanced. And frankly unfair to consumers if those differences operate to their disadvantage.

So FSRA through CCIR I expect will be consulting on segregated fund guidance this year. This guidance should, you know, unless there are substantive reasons which we'll identify and discuss publicly, we'll try and bring se -- segregated fund client outcomes into alignment with the client focused reforms for securities. And then as we get that guidance in place that then of course gives us that tool, that platform again to actively supervise insurers and intermediaries. I mentioned the role of MGAs, our -- our work on life agents to make sure that their processes and controls and practices give seg fund investors fair treatment in Ontario.

Clare O'Hara:  And just to confirm, you are meeting with other provinces in that -- in that guidance. You're talking to other provinces about streamlining something. Great --

Mark White:  -- Absolutely --

Clare O'Hara:  -- So jumping over to innovation --

Mark White:  -- They --

Clare O'Hara:  -- Sorry --

Mark White:  -- Yep --

Clare O'Hara:  -- We have a bit of a delay. So. I'm just gonna jump over to another audience question around innovation. So FSRA recently released its innovation goals for the financial services sector. And new pension related products have been popping up recently. So to what extent is FSRA looking to encourage innovation in the retirement securities space?

Mark White:  You know, it's a -- it's a -- that is a really great question. So we actually just put out an innovation framework. And, you know, it -- it -- it actually doesn't explicitly apply to the pension sector because the pension sector's a little bit different. It's not a for profit sector. It is part of differed compensation. There are fiduciary standards. But that isn't to say that our pensions are not innovative and that other people in the marketplace are also trying to innovate to solve pension problems.

And so I'll give you an example of that. And there is a -- a particular fund that is out. It's in distributions. It's a securities product, I believe is a mutual fund, that actually tries to mutualize longevity risks. And so as they say this is the decumulation phase of your retirement savings. So, you know, that's a very important issue how you mutualize that. And we're looking closely, cause that has some aspects of an annuity, a variable annuity. And as of course dealing with pension risks. So we're very open and we are actually looking at this one product that I mentioned is in the market. We're in an active dialogue with other regulators who are involved and with the -- the -- the promoter, the sponsor that created this, you know, important new innovation. Cause we want to understand it and make sure that it's gonna be offered in a way that's gonna be safe, you know, for the investors that people can understand what they're getting from this product.

So I think that, you know, there is a really important opportunity for in, you know, looking at some of these pension issues. As I say there is a decline in defined benefit pension plans. You know, there's not many new ones starting except for in the public sector. They have -- the numbers tend to dwindle. And so with people then having their own defined contribution or group RSPs that allows you to accumulate income. But then how do you manage it through your retirement and particularly how do you manage the risk that you could live to be 105 years old or you -- you may not be so lucky.

And so how -- you know, you just need to be able to find that. And so the mutualization of that longevity risk is a -- is a really important issue and I'm -- I'm so glad to see that there is innovation going on. And our innovation framework even though, you know, it may not be targeted specifically at pensions as I mentioned, it does outline that we have other tools. So we can use our discretion in certain ways, we have rule making authority, we could have discretion under rules. We can allow for trials to go on. So we're not here to basically to stop innovation.

We actually want to encourage innovation as we say in our framework in a way that we can ensure is controlled and in the public interest. So if there's some pension -- some innovators out there that think they have a solution to pension problems, Marlena, who you're gonna hear from later at the innovation office, you know, that she heads up, she can't wait for your call.

Clare O'Hara:  Great. So -- so we are running down our time here. I'm gonna give you sort of last words, Mark, on sort of where do you see FSRA in the future? You know, there's an upcoming election. Are you gonna be asking for a bigger budget, more power, what do you see in store for FSRA?

Mark White:  Well I -- I, you know, I will say, you know, the -- the elections, that's a political process and we just continue to do our job. I think one way or the other it doesn't -- that doesn't change what we do.

And our budget also, I should point out, Clare, we're funded by assessments against this -- the regulated sectors. And so those are sometimes fixed fees for a mortgage license or a insurance li -- agent license. And the bigger sectors, they also pay on a variable basis based on the costs that we incur to support regulating them. So I'm not even concerned about that from -- because our -- our discussion, although that budget of course is importantly subject to political oversight and ministerial approval, you know, that is something that we have been working out with the sectors and -- and that's been going well.

So your more fundamental question. So, you know, where's FSRA gonna be a few years from now? So we're -- we're a young organization. And we've made tremendous progress in our less than three years of existence. But we still have plenty of work to do as we grow and transform. You know, I hope, let's say five years from now that our principles-based and outcomes focused regulation, it'll be well understood and internalized across the sectors we rate -- we regulate. And the reason why that's important is it'll get us away from proscriptive regulation and a compliance mindset.

Our regulatory relationships can become more sophisticated and frankly less burdensome. Regulated entities, they'll be able to align with the outcomes that benefit the public that we're all trying to achieve. So you get better regulatory outcomes, stronger consumer protection, as the entities will be working in a way that is naturally aligned with achieving those public goods.

I also hope three to five years from now that our supervisory capabilities and our regulatory tools, the ones that are necessary to getting full effect to our mandate, that will be fully developed. And will be less reliance on guidance and rules in one hand and on enforcement on the others, what I call the barbel, and that we'll have that strong middle as a respected, thoughtful, and well-resourced supervisor with tools and resources to fulfill our mandate in a variety of ways.

I'm -- also think that, you know, five years from now our involvement with consumers -- because it's already continued to grow and mature so much in the last few years -- the work of our consumer advisory panel, I'd like to give a shoutout to those people who volunteer their time to provide us great counsel. I think that work will broaden and deepen. And beyond that cap work, we'll also have increased consumer participation in our policy making agenda and we'll -- our consumer research which we're building the foundations now, I think that'll also give us a great leverage point.

And so, you know, we'll understand the public better, cause understanding the public interests is at the core of what we do, and the public interest is incredibly diverse. And so that's really important to us particularly for vulnerable consumers.

I mentioned the innovation office. They're gonna move from theory to practice. That means going away from supporting trials to supporting the introduction of new products and services. The -- I think our framework will be revised, fully implemented, our test and learn environments that I mentioned, they'll be not only operational but constantly evolving. And the test of innovation success, and I put this challenge for the panel coming, I think it's about can we successfully bring down barriers to support innovation and the public interest so that we will see new financial products and services being offered to people in Ontario.

You know, I also look at our -- a bit internal and we're a learning organization. We're constantly looking for ways to improve our processes and people. And that includes using information technology and data to modernize how we regulate. We call this FSRA Forward. In five years we'll be fully utilizing our FSRA Forward technology to deliver regulatory efficiency through simplified and fully digital operations, a 360 view of regulated entities, case, content, and relationship management, and we'll have data analytics and enhanced client portals. I have a dream for this. It'll also allow us to redirect human resources to higher value added tasks, or to reduce our fee assessments.

Finally, culturally we want to be recognized, and I think we are today but I want to build on this, to be a place that talented people motivated to serve the public will want to work. I want them to come here because they know what we do in FSRA, it makes a difference and they want to be part of that success. So that's my initiative to --

Clare O'Hara:  -- Great. And I'm getting -- thank you so much, Mark. I'm getting the hammer on our time today. I appreciate we were able to get to all of the sectors that you oversee and it was a great discussion. Thank you so much for inviting me to join you today.

Mark White:  Thank you, Clare. And you know what, they were tough questions but I hope this gave people a great insight into what we're doing at FSRA and our important work. Thanks for taking the time to come today.

2022 FSRA Exchange Event – 03 Principles-Based Regulation Panel

Glen Pedassery:  Good morning, everyone. Just doing a quick check in as we are resuming. First and foremost allow me to apologize for the abrupt switch over to the timer. We were supposed to -- I was supposed to let folks know that we were going to be going onto a bit of a technical break to allow our production team to set up for the next session. But that kind of switched over before I had a chance to get on to the microphone, so my apologies for that.

Just as a heads up then for everyone going forward, after every session we will actually be taking a 10 minute break to allow for the team to actually set up virtually for the next -- next program that's in there. So allow me to thank Mark and Clare and everyone who had taken the time to submit questions. I actually thought it was a very engaging dialogue.

Two things: if you didn't get your question answered and you submitted it, we will endeavor to respond to everyone through the publication of the session and the questions that were received with answers. And also if you have any additional questions please send it to [email protected] and we will get back to you. So that link and that email will be provided as well later. So I just wanted to give people an opportunity to know that we acknowledge receipt of your Qs and we endeavor to give you the As. And then any additional Qs and As we will actually make sure we respond to as well.

There were several questions throughout the moderated session that was asking about the taping and production of the session after. So confirming that we will be providing the copy of today's session through the FSRA website, so people will be able to access it and actually replay it at their own leisure.

So a few minutes ago you heard Mark speak about the importance of principles based regulation. This is a significant shift in FSRA's approach to regulation and in fact our approach in partnering with those that we regulate. To better explore what this shift looks like, I am pleased to introduce my colleague Jordan Solway, who is the Executive Vice President of Legal and Enforcement at FSRA. He will actually lead you through this next session. Jordan, over to you to introduce our panelists and begin.

Jordan Solway:  Thanks, Glen. And good morning. Very excited to be honored to Chair this panel. We have a -- an incredible dream team of speakers. I'm gonna start by introducing Stephen Fuller who is the Senior Vice President of TCI Global and the Head of International Government Affairs at Travelers -- Travelers Insurance. Steve is a little bit of an international regulatory man of mystery. He's worked previously in countries such as China where he was count -- country manager for -- for Chubb Insurance. He was -- his job was Asia Pacific Zone Manager for Marketing and External Affairs. And he also worked as the Interim India Country Manager.

He works extensively with international regulators, government officials, legislative oversight committees, and international trade associations. He's involved also in ongoing regulatory reform and capital standards in the United States and internationally. He's also Chair of the America Property and Casualty Insurance Association's International Committee and an advisory board member of the Rand Corporation's Center for Asia Pacific Policy. Please join me in welcoming Steve.

We also are -- I'm also pleased to welcome Simon Archer who in his own way is a Renaissance Man. A partner at one of the leading law firms in labor -- labor law in Canada, Goldblatt Partners. Simon works with professional associations, trade unions, boards of trustees across Canada in negotiating pensions and benefits, trust administration, fiduciary issues, public interest litigation, insolvencies, corporate accountability, and governance. Simon also was appointed previously by the Minister of Finance of Ontario to represent the interests of workers in unions in an expert review of the regulations that apply to Ontario (INAUDIBLE) where he served as a researched for the Ontario Expert Commission on Pensions. He's also a Director of Comparative Res -- of Comparative Research in law and political economy forum at the -- at Osgoode Hall Law School. He also teaches at King's College London and has been an adjunct faculty professor at Osgoode Hall Law School, York University, as well as Universities King's College and the University of Western Ontario.

Separate and apart form that very extensive qual -- extensive qualifications. He's also an accomplished soccer player, a vegan chef, and he even restores antique espresso machines in his spare time, of course, taking a principles based approach.

Last but never least, and three hours behind us in Vancouver but many years ahead of us in her understanding of PVR is Dr. Cristie Ford who is a Professor at the Allard School of Law at the University of British Columbia where her area of specialization is regulation and governance in Canada, the U.S., along with international finance and securities regulation. Dr. Ford is a recipient of the Curtis Memorial Award for Teaching Excellence and also served as the Associate Dean for Research in the Legal Profession at UBC. She is the author of two books, one I would add is a leading text on securities regulation which she co-authored with the former Governor General David Johnson. She also has -- is widely published including recently in the McGill Law Journal where she wrote a piece on principles based securities regulation in the wake of the financial crisis.

Dr. Ford has also co-edited the leading international journal Regulation and Governance and presently sits on the executive board and the board of the Journal of International Economic Law. Very similar to Simon, Dr. Ford has been retained by governments including the Federal Department of Finance to advise on banking and securities regulation and has been a Killam Faculty Research Fellow at UBC. So you'll see we have a very qualified panel that we're gonna get right into it. And I'd perhaps like to start where Mark's fireside chat ended which is PBR is obviously a foundational aspect of FSRA as a new regulator. There was a clear vision by FSRA for PBR to use its statutory objects to draw out specific regulatory outcomes based on identified principles in our statutory objects. Things like promoting high standards of business conduct, protecting the rights and interests of consumers. FSRA also wants to utilize PBR to provide our regulated entities and sectors with more flexibility in determining how they achieve compliance with regulatory expectations while remaining accountable for achieving those outcomes. And the ongoing operationalization of PBR in living these principles in a way the sectors can understand.

So my first question is really to you, Dr. Ford. Which is does PBR work?

Cristie Ford:  Yes. But I think it really depends on how you build it. So principles based regulation, if you think of it as only high level principles which are not meaningfully enforced and -- and understood in -- in -- in sort of a more comprehensive way with lots of attention to communication between the regulator and the regulated, if all you have are high level principles without the regulatory structure to implement them meaningfully then I think it's fair to say they don't work. That really  just amounts to deregulation.

If what you have is a principles based system which has a regulator in place that can work with those principles in a meaningful way that can collect information from the industry, that can engage in a communicative way at -- while still being independent that can operate in an outcomes oriented way based on data that it's gathering on an ongoing basis. And I think what you really have is a system that is far better than a purely rules based system. And it is more likely to achieve outcomes that are in line with regulatory goals.

Jordan Solway:  Thanks, Dr. Ford. Maybe I could just turn quickly to Steve. Because you've got a very broad international experience working with financial regulators around the globe, particularly in Asia and -- and the UK. Just to supplement Dr. Ford's answer, can you comment on your experience and really what are the circumstances that are best for PBR to be successful in your view?

Stephen Fuller:  Yeah, well first thank you for the kind introduction, Jordan. And thanks also to FSRA for inviting me to participate alongside such highly respected and accomplished panelists and moderator. I feel underqualified, but as the sole representative from an insurance (AUDIO GAP) company I am unique. To answer your question, I think Hong Kong is a very good example of a well-functioning PBR framework. And indeed it should be as Rob Curtis, one of the Hong Kong insurance authorities senior most regulators was the lead drafter of the international association of insurance supervisors insurance core principle on principles based regulation. And the in -- the insurance core principles are basically regulatory -- it's regulators. That's the best example of a se -- of a successful PBR framework that I know of especially since I've spoken to all the companies operating there as well as to the regulator is a New South Wales in Australia.

And speaking of Australia, a big shoutout to Canada on a great Australian Open; totally riveting tennis. In New South Wales, back to the question, there was a complex problem that needed to be addressed. Basically mandatory third party liability, auto insurance sector, had become highly litigious resulting in very high premiums, slow claims handling, and minimal compensation for claimants. So basically you had a -- a perfect storm. So in 2017 the government and in particular the Ministry of Finance took a leadership role to address that problem. The Ministry of Finance empowered and tasked the regulator, the state insurance regulatory authority, SIRA, which took the important first step of canvasing consumers and then worked extensively with the insurance companies to get their recommendations, their advice, and their buy in. And in that collaborative process mutual trust was established.

And I think for New South Wales the key here was first recognizing and addressing an -- an important problem that consumers wanted address -- addressed and then setting up metrics to measure the outcomes. In this case better access to insurance and lower rates and new market entrants were a plug for the regulator and a faster rate approval process was a big benefit for the insurance companies. In the system rates can be approved very quickly because of the excess profit and loss provisions that were put in place. And those provisions protect companies if they lose money and they protect consumers if the companies make too much money.

And again, I -- I think the means through which this hybrid system was developed was early and extensive interaction with the companies and consultations with consumers. I think that high degree of interaction and then the trust that was earned were both critically important. And interestingly all of the in -- Australian insurance companies that I spoke to were very positive about their relationships with SIRA, the regulator. And for the public SIRA continues to monitor consumer satisfaction through its call assist program. And under this call assist program SIRA follows up with claimants and provides in person or virtual assistance when necessary. Thanks.

Jordan Solway:  That's great, Steve. I mean, I -- as you know when we were working on the UDAP rule two summers ago through your reference we were introduce to, right, you know, the Hong Kong regulator, the Australian regulator. And I was really struck as were my colleagues by how even though geographies are different and maybe the markets are slightly different, but we're all dealing with very similar problems with similar challenges.

So, you know, the -- your observation about collaboration, cooperation, the use of data, and fundamentally trust really resonates.

Maybe just to shit a little bit, because insurance is an area where PBR has -- in other jurisdictions has been demonstrated to be successful or effective. I often hear that PBR is difficult to implement in statutory or regulatory regimes which can be very proscriptive. And when I think of script -- proscriptive act, I look at the pension benefits act in Ontario which is a very comprehensive regulatory framework. And so maybe Simon, if I can turn to you, is an expert in that area, whether you can identify or provide your insights as to what you think the main challenges are and whether you can be truly principles based in an area like pensions.

Simon Archer:  Thank you, Jordan. Yes. Well just to jump to the conclusion, I think you can. And -- and Dr. Cristie outlined some of the conditions that are necessary to make sure it's successful. But although it's a detailed code, pension -- pension law in Ontario and in Canada has always been a mixture of both principles based and rules based elements. And just to draw out some obvious examples, perhaps, investment and governance functions are typically very principles based obligations and compliance obligations whereas funding and benefit obligations tend to be a bit more rules based. And there's always a mix of the two in regulating the pension sector.

Commissioner Arthur is -- actually back in his 2008 report gave a very useful sum -- summary and description of -- of the mix and how it has evolved over time at least in Ontario. And I think it's still a useful guide and introduction to the way in which the system has evolved. In a principles based modality I think there are probably two major challenges to make successful. From the perspective of regulated entities themselves, pension plans themselves and their stakeholders, understanding their role in a principles based system, it is a big challenge or can be a big challenge particularly small or medium sized entities with more limited resources and capacity to take on the challenge of understanding and developing compliance with -- with the law.

They're also heavily dependent on the advisory community to do so. And so there's a challenge to develop that dialogue with the regulated entities themselves, but also with the advisory community that's such a big part of decision making in the sector. From the point of view of the regulator, in order to make it a success I think one of the big challenges is how to define compliance with a principle and perhaps more particularly how to define breach of a principle and what's gonna happen in the event of breach.

I -- I -- I -- and I think Dr. Cristie said earlier, you know, a successful PBR system is only effective at achieving the outcomes that we all want when there's a real apprehension on the part of the regulator and the regulated entities that the regulator will enforce the principles and will have a strategy that incorporates guiding behavior through guidance and dialogue, but also by detection of violations and proudly ensuring the defaults get corrected. And that's a big part of maintaining the trust and the dialogue that we've already identified as a key part of principles based regulation.

Jordan Solway:  That's -- that's very helpful. I think some of your observations, particularly, you know, that -- there -- there seems to be a misconception in a PBR context that you can't have rules. And I think you've -- you've successfully addressed that. And also this -- also this notion of scalability. But one of the points you made really I'd like to focus on perhaps Dr. Ford. I -- I can call on you and not specifically, you know, identifying what compliance looks like. And I often think about, you know, the old community standards test which is you know it when you see it. That's used in a different context but in the context of securities regulation which I know you've had considerable experience in BC, Dr. Ford, can you comment on how some of these challenges can be addressed?

Cristie Ford:  Sure. Well I think my role here may be just to amplify some of what -- what Simon said. Because I agree very much with what he said. And maybe I can just step back a little bit to -- to also emphasize this idea that principles based regulation doesn't mean doing away with the rules. There will always be a place for rules. And understanding, I guess, also the distinction between sort of law on the books as written and law as it is actually implemented.

So you could have a principles based system but as written, so you have a principles based statute. The BC Securities Act is a principles based statute now. And what that means is that things are often passed at a fairly high level of generality. Not always though, there are clear rules guiding things like procedural fairness. So -- so it's calibrated to different, you know, different -- different situations will -- will call for a -- a greater or lesser amount of specificity.

And so all laws and all systems operate on a continuum between principles and rules. But what, you know, but principles based implementation is really -- it -- is really a separate thing. And it can take place even if you don't have a principles based statute. And in fact that's what the BC Securities Commission did before it had the principles based statute, it just adopted a different way of engaging with its statute and a different way of dealing with industry actors.

So it started sort of as a defile -- default by not reaching for rules first. So it -- it -- and it still starts by considering whether existing principles cover a situation rather than just piling on with a new set of detailed rules. And then from there there were some important shifts in regulatory culture that really followed from that. One was this -- this -- this approach really based on thinking about principles, articulating them in a flexible and outcome oriented way in partnership -- I -- I guess partnership is too strong a word -- in communication with industry actors. So accepting input, having an ongoing dialogue which allowed the regulator in concert with industry to sort of put some meat on the bones of those principles.

And so that really required a few things which -- which Simon has already alluded to. Expertise for sure, a -- a -- a communicative relationship with industry, restraint in trying to fill in the details by themselves. So -- so a lot -- so regulatory guidance, absolutely, but based on an ongoing conversation with industry so that the regulator has better information. But then again, as Simon said, regulatory credibility is really kind of the bottom line. At the end of the day the regulator has to maintain a degree of independence, a degree of confidence about its own position and interpretation whether it's talking about rules or principles. So understand, you know, having a baseline understanding of what a principle fundamentally, you know, looks like in practice and then having the -- I guess the independence and the support and the resources to follow through with that all the way through to the enforcement stage if necessary.

Because I think it was William Douglas in the United States in the 40s who said if you have a big shotgun before -- behind the door then hopefully you will never have to use it. And I think that's the idea. It has to be there; the enforcement function has to be there. But ideally what -- what happens instead of sort of moving to enforcement first and foremost is that ongoing communication between a regulator and a regulated actor can help support that actor in interpreting the -- the regulation in a way that is conducive to their compliance and that actually is really sort of more effective for all concerned.

Jordan Solway:  So just -- that's very helpful, Dr. Ford, and I think that we've, you know, certainly we've been trying to follow that since FSRA's inception through our guidance, looking at our sector statutes with a fresh set of eyes, applying modern approach to statutory interpretation in the absence of having, you know, specific principles. So I think that's all very much consistent.

But one of the things I wanted to -- to pick at if I could, particularly when it comes to PBR, is this notion -- and Mark referred to it this morning -- of innovation. And I know like me you're a big fan of Scott Galloway or Professor G. And he often talks about what he refers to as unlocks, where you're unleashing a leap forward with a new innovative approach. And he's, you know, he often cites a whole bunch of these including, you know, U.S. college admission in the United States. And I guess my question is we've, you know, talked a lot this morning thus far about the communication, about focusing on problems, on feedback loop, on the communi -- on the use of guidance.

When it comes to innovation, I guess, is PBR the right system to manage these types of profound changes, to create these unlocks? Maybe you could comment on that if -- if you don't mind.

Cristie Ford:  I'm sorry, you -- were you referring to me?

Jordan Solway:  Sorry, yeah. Sorry, Dr. Ford I was referring to you. I apologize.

Cristie Ford:  Oh. I apologize. So yes, absolutely. And I've spent a lot of time thinking about innovation and regulation in the years since the financial crisis. In fact, I have a book called Innovation and the State. And I guess my -- ultimately I think PBR is absolutely the right system for thinking about innovative -- private sector innovation and how to deal with it. And if you imagine trying to deal with a highly innovative sector based on a very rules based rigid sort of detailed system I think it can be clear why that's not going to work.

And -- and really it's because the rules are just not flexible enough, not sort of capacious enough to be able to imagine new ways of doing things. And so a purely rules based system is going to produce maybe one of a couple different outcomes. One will be that it will stifle innovation, good bad and otherwise, because the rules just prevent any kind of flexibility or creativity on the the part of industry actors and on the part of regulators.

The other thing that might happen if you have a pure rules based system is that you will just get loophole behavior and circumvention on the part of industry actors. Or people will go elsewhere. So -- so -- so the rules will be avoided, undermined, eroded, you know, the action will end up being elsewhere and the rules will not again achieve the effect that they're aiming to achieve.

Putting rules in place in a highly innovative system is a little bit like trying to put wallpaper on a cat. It's -- you can pretend that you're doing something really sort of comprehensive but ultimately you're just -- you're papering over a problem that is not staying still for you. So a principles based system is absolutely the better way to go if you want regulation to stay relevant, if you want it to actually be responsive to industry. And through the communication with industry a principles based regulator has better information. So because there is a meaningful communication loop with industry, the regulator has better access to information, understands what's going on, understands the challenges that industry actors are facing, and also understands sort of where the risks might be arising for consumer protection, for example.

So that is I -- I think in my view really quite a -- a -- a clear answer, but I think the second piece has to also be an appreciation that innovation is not by definition beneficial across the board. To assume that innovation is always going to sort of -- lift all boats or is going to be congruent with the kinds of objectives that the regulator wants to see is I think not a -- not reasonable. Understanding who's innovating, in what context, for what purposes is essential. And that is the kind of information that a well-functioning principles based regulation has better access to. But again, it requires at the end of the day a confidence on the part of the principles based regulator so that you don't just end up ceding the field to private actors.

Innovation is always going to have enormous potential and enormous risks. Any innovation of any significant magnitude can bring improvements for individual industry actors and for the public, but it's -- but there needs to be a public voice there. And that is, you know, a voice that is interested in the public good above all. And that really ultimately is the irreducible role of a regulator. So there has to be a degree of confidence, resourcing, support capacity, and outcome orientation so that the -- some -- so that the regulator is looking at what the effects of that innovation are on an ongoing basis. And then you have a system that really stands the best chance in a complicated and difficult world of advancing positive innovation and minimizing the negative.

Jordan Solway:  Yeah. I always think about this in the context of coming back to our statutory objects. And the ones in particular are, you know, protecting the rights and interests of consumers and also making sure that we're promoting high standards of business conduct. So I think that's -- that's a helpful response.

Simon, if I can turn to you, and again I don't mean to pick on your sector, but Mark referred to some of the innovations this morning. But can you have innovation in the pos -- in the pension sector? And if you can, is PBR the right tool for that?

Simon Archer:  Sure, pick on pensions. We all do. Before I turn to your question though I -- I've committed I think the Zoom equivalent of standing up without my trousers on by referring to Cristie as Dr. Cristie already. I'm very sorry, Cristie. I apologize.

But okay, pension and -- and innovation. There is innovation. We can and do see innovation in the sector right now. And it's important because perhaps I think the biggest challenge for the sector and big social challenge generally for Canadians is to pick adequate and affordable retirement savings programs available. There's a sort of long, slow, looming crisis coming and we've heard about it over -- over decades now. And so that's a big innovation challenge for us. And of course as Cristie has said, one of the big advantages of the PBR approach is the dialogue that you can have with actors, regulated entities, when they come up with new ideas, ways to try and meet those challenges.

For pensions it's expanding coverage and particularly even though it's a big challenge defined benefit like coverage so there's certainty and predictability, affordability. Those kinds of plans and benefits are the kinds of things we want to see in the sector. And a flexible approach to how that's gonna be regulated encouraged and a dialogue with your regulator to help achieve that is a fantastic tool and a fantastic opportunity to be used. And we've seen examples of that in the public sector plans in particular. They're leaders globally at what they do and both on investment side but also on making plan benefits available to more employers and more workers in Canada generally.

There's been a big expansion of their offerings to folks outside their more traditional sectors. And -- and really the only caveat I'd have to say to that is of course innovation can be a bad word as well as a good word. And distinguishing bad innovation from good innovation is something that we really need the regulators' guidance on. Creative non-compliance is not good innovation we think, whether that's in, you know, poorly communicated risks in some kinds of new benefit arrangements with housing in some target plans. Or hidden risks or conflicts in investment practices that aren't quite well enough understood. And other examples like that.

So innovation's a neutral thing in some ways. It -- but it can be also a good flavor or a bad flavor and I think that's what we have to be alive to from the principles based approach perspective.

Jordan Solway:  Thank you, Simon. When I think about unlocks, Steve, maybe I'm gonna put this to you, I think in our sectors probably the greatest unlock is Ontario Auto. And the ability to actually improve the value proposition to the consumer. Maybe Steve you can chime in on that, whether you think P -- PBR is sufficient. Is that the silver bullet for Ontario Auto or are there other things that we should be thinking about to, you know, to make the product -- to, you know, unlock -- unlock the value for consumers for the product?

Stephen Fuller:  Yeah. Well first, having worked in 30 plus countries across five continents, one observation I have is that the most effective regulatory regimes are the ones that feature truly independent regulatory agencies. Independence, technical expertise, and authority are the hallmarks of effective well-run regulatory (INAUDIBLE). Ministries of Finance may not always have complete sight line into the complexities and subtleties of insurance and reinsurance. This in part is why so many in the industry fully support FSRA's new innovation framework which I think can be viewed as an important pillar of a principle based regulatory framework.

For FSRA to be empowered to hold regulatory sandboxes, to have the authority to waive certain regulations to entice investment and (AUDIO GAP), that's a major step forward and in keeping with world class financial services markets. That said, insurers currently are not allowed to offer choice and optionality when it comes to the auto insurance product as it is locked in legislation beyond FSRA's purview.

I think Ontario consumers would love to have the ability to purchase a scaled down tailored to their individual needs auto insurance policy. To pay only what (AUDIO GAP) what you really need I think that has a nice ring to it. But if FSRA's innovation framework does not allow companies to touch the product, I’m afraid there will only be marginal gains when it comes to the innovation framework at least for the auto insurance sector.

Bottom line in my mind, FSRA has very strong leadership, technical expertise, insights, and proximity to the file but needs to be further empowered to deal with the auto insurance product if Ontario is going to be viewed as an attractive market for new market entrants, for new insurance companies, and in order to keep the current carriers healthy, creative, and innovative so that they can provide the best possible service to Ontario consumers.

Jordan Solway:  And, Steve, if I could, cause I -- I think that's, you know, you're raising an important point is -- is that your experience in internationally and other markets where they've been able to solve -- because I think auto is a common problem in many markets.

Stephen Fuller:  Well yeah, and I (AUDIO GAP) the example I gave about New South Wales I think, you know, they had a number of the same problems that Ontario has currently. And I think that whole process that they went through, working closely with -- with the companies and consumers but also being further empowered by the Ministry of Finance I think, you know, those elements combined helped them solve that problem and deliver, you know, much better products to consumers.

Jordan Solway:  And -- and has that -- in New South Wales has that been a sustainable solution to your knowledge?

Stephen Fuller:  Yes, based on my conversations just, you know, I guess about six months ago with the -- with the insurance carriers and also with the regulator and also based on some of the outreach that SIRA, the regulator, has done in contacting consumers and really keeping, you know, taking the pulse of consumers. You know, the fact that the -- the -- the companies have excellent relationships with the regulator, that's also quite a -- a -- an important factor.

Jordan Solway:  Thank you, Steve. Maybe if I can just switch gears, you know, we've talked this morning about PBR requiring a coordinated effort, ongoing communication between the regulator and the sector, and from FSRA's perspective we've been trying to do that through our guidance. And maybe I can ask, sort of turn the tables a little bit and start you with -- with Si -- start with Simon. Can you comment how effectively you think our guidance is? And perhaps if you have -- can identify specific examples good or bad.

Simon Archer:  Well they've put me on the spot. Okay. Well, look, I think FSRA's done a commendable job of taking the existing -- and I -- I'm speaking primarily about the pension space that -- that I know best. But as I say, a commendable job at taking an existing body of guidance that it inherited which was developed over many years and -- and different approaches to administering the statute. And been reviewing it and reflecting the new regulatory approach in the new guidance, risk assessment methods, outcomes focus and -- and so on. And it's a massive undertaking. A lot of detailed work with stakeholders has occurred.

I've been part of that and I've been happy to be part of that in generating this new guidance and updating the former regulatory approach. I think on the whole this new guidance has been helpful in generating and sustaining this essential dialogue. There's been good dialogue with the JSPPs, the Jointly Sponsored Pension Plans. That was mentioned earlier. And there was a -- a couple of questions about that put to Mark. Also in the multiple employer space there was new guidance issued last spring. I think it's been helpful in generating conversations that hadn't happened for a long time if -- if at all, both at the regulated -- both at the board table, the trustee table, but also with the regulator as well, an opportunity to kind of introduce each other and talk about expectations together moving forward. And I -- I think it's been successful at generating those conversations. And so that's good.

And also even on difficult subjects in these sort of risk based approach and the monitoring approach in PPGF eligible plans which is of course contemplating failures at sponsors and -- and risks to plan members. And so a difficult piece of guidance to issue and talk about, and I think that a good job was done there.

I think in terms of big challenges, probably our greatest collective challenge right now, and this is a challenge across all prudentially regulated sectors, is -- is the one that Mark mentioned earlier in his remarks, and that's the climate change challenge. We have a lot of work to do I think to develop guidance that will assist pension plans in understanding what to do about it. And as I said, particularly medium and small actors in the sector, big actors maybe further ahead in tackling these issues. But we have to I think -- and we've seen other principles based regulators doing this in the UK in particular, the financial conduct authority has been issuing some useful guidance which is helpful to refer to in thinking about our own.

But, you know, review of disclosure and -- and reporting to members and to the regulator what sort of standards at the asset and portfolio level are needed to ensure that the price signals are working in the way that it is intended to meet the -- the global and national targets. And that work is still very much underway as Mark said. Look forward to developing more of it. And I think that's one of the most urgent pieces of policy guidance that we'll need to see in -- in the very near future.

Jordan Solway:  So I -- I think it's -- it's fair to say and I -- I've observed this that your sector is perhaps, you know, the most engaged our of all of our sectors given the complexity of -- of registered pensions and the issues you're dealing with, cause you're dealing obviously not just with providing the benefit but asset management issues.

Maybe if I could turn to you, Dr. Ford, because I think this raises a really important question in my mind, which is, you know, looking at it from the sector's perspective can you comment on what you think is the -- what's the level of engagement that you think as the minimum level that's required for that sector in order to really reap the full benefits of PBR?

Cristie Ford:  Right. Well I think thinking of it as a minimum level I guess I -- I would say the more you engage with the regulator the more trust you will generate with the regulator, the better your communication with that regulator will be and the more beneficial that relationship to you. So you can hope not only for -- for guidance in the written form but also for guidance at a sort of a more comprehensive level. So -- so really understanding principles based regulation without the communication with the industry actors, you're not going to get the kind of effective system that one would hope for.

So for -- for -- for folks in the industry I think it's important to understand that this is really a compliance focused not enforcement focused regime. It's about being engaged. It's aimed to be or the intention is that it be cooperative to the greatest extent possible. Now again, it doesn't mean there's no enforcement stick in the background. There is. But this is -- the point is that this is not a gotcha regime, right? Where the regulator is looking for low hanging fruit and is seeking to I don't know catch you on some small rule violation. It really does look at overall regulatory priorities and by employing a risk based outcome oriented data driven regime, you can -- you can be confident that you're not going to be sort of caught out as long as you're communicating with the regulator.

So -- so what this really means is it's in the industry -- it's in the interest of industry actors to really come to the regulator with problems earlier to demonstrate good will, and this allows the regulator to really focus its resources, its enforcement resources on the folks who are real, you know, causing -- a -- a -- real problem actors to mitigate that harm while not needing to do that with industry actors with whom they have a good relationship.

And I guess I would -- I think of this as being sort of a little bit equivalent to an example of start-up financing. So if you are a small start-up company, there are a lot of them here in Vancouver, you will have all kinds of debt instruments with various different lenders as well as, you know, various other ways of financing yourself. But if a small start-up company finds itself in default of a covenant on its -- associated with a -- with a debt obligation, what they need to do is contact, you know, counsel who will contact the lender and say I think we might be in breach of a covenant.

And the -- when -- when that communication happens earlier the chances are, you know, very very strong that that debt -- that that lender is not going to enforce on the covenant and re -- you know, and -- and require repayment immediately. What will happen is there will be a waiver, there will be communication, people will understand why the covenant was breached, and this will modify or it will, you know, and -- and the underlying debt obligation and -- and -- and lending it doesn't go away. Because there's that early communication and because ultimately everyone's interests are served by having industry actors operate effectively and well. And nobody's interests are served by having a oppositional relationship there. And that's really the same when it comes to a principles based system.

So understand that that relationship is important and it matters and it is to both of your benefits. I guess also understand that principles based regulation requires you to think about your own internal compliance. And to understand what you're doing to ensure that you have in place a system to prevent and detect internal violations of law in a timely and effective manner, that you respond effectively to them, that you communicate with the regulator when you fine them. And it's not about sort of the -- the letter of the law or reading the rule without its spirit and working to just sort of tick boxes on what you are required to do and not required to do.

Now I -- I should say this is easier for bigger actors with more built out compliance departments and more resources. So for smaller actors, again, get in touch. Talk to your regulator. Talk to FSRA. And there may be times when having a series of background rules or, you know, that kind of clearer support is useful for smaller industry actors. And -- and that's okay. There will also I think be a transition period. And so it's reasonable to understand that there's going to be a time period during which people are working at the contents of principles, building the relationship with the actor, adjusting sort of on the fly, and it will always be evolving, right?

And so again, so long as, you know, so -- so communication is in your interest. I don't know if there's a -- a minimum amount of time that you want to be communicating with your regulator of if that's really the -- the way to think about it. Be -- be -- the way to think about it is that this is one of your relationships that matters and -- and there are real advantages to being straight up with your regulator in this system.

Jordan Solway:  That's a -- that's a great answer. And I think, you know, a couple things that really I -- I would focus on would be -- and I often say this. Probably people are gonna cover their ears at FSRA. But, you know, PBR is a -- it's a journey, it's not a destination. In that you're never gonna sort of be at the point where you're finished. It's constantly evolving. The dialogues with your sectors are constantly changing and your focus on -- on problems and issues I -- I come back really, or I -- I would end where Mark's -- Mark commented, which is if you do this right you're gonna have much better regulatory outcomes and you will reduce the burden on the industry. Right? But there's a lot within that to get to that point and I think that, you know, the staff within FSRA and the sectors have been trying to, you know, work with each other towards that goal.

The other thing I would just comment on cause you've raised it. You know, I -- I don't want anyone to get the impression that the enforcement function at FSRA is like the Maytag repair man. You know, our enforcement function is very active and very busy. My colleagues Chris Solis and Alyssa Sena(PH) can attest to that. There's always, you know, there's always issues you're dealing with particularly to your point, Dr. Ford, where, you know, some participants you can be as principles based as you want and communicate as much as you want. But they're just gonna flout the system. I mean, you have to deal with them. You have to make sure there's public confidence in the system and that consumers are protected. So enforcement is alive and well in case there's any misconception about that.

I am looking at the time. I hoped maybe I could get one question but I -- one final question if Steve's -- I can put it to you but if you could try to just be somewhat brief so we can wrap up. You know, from the sector's perspective and you -- you come from obviously the insurance side. What do you think is the best way to operationalize PBR if you're a -- an insurance company or a broker or an agent in order to achieve those desired outcomes?

Stephen Fuller:  Yeah. Well I'll try to be very brief. One method for operationalizing PBR in the insurance sector is through the own risk and solvency assessment process, or the ORSA. And ORSAs allow management to identify and focus on areas where risks are high and ORSAs allow regulators to assess the effectiveness of management's efforts. ORSAs are (AUDIO GAP) jurisdictions in Canada. Insurance companies conduct -- conduct ORSAs in accordance with expectations set out by the super -- superintendent of financial institutions, the Office of the Superintendent of Financial Institutions, OSFI, the solvency regulator, and each insurer will produce its own unique ORSA based on the complexity of its business and profile.

I'm not sure if you want me to say anything more, Jordan, given the -- the time.

Jordan Solway:  No, that -- that's helpful, Steve. I just I'm -- I'm conscious of where we are. So I didn't think about that. ORSA's a great example of, you know, how you're using your own assessment and the risks in your business and adjusting it accordingly so your capital is adjusted. So that -- that's actually a helpful way to think about it.

Stephen Fuller:  Right.

Jordan Solway:  I -- I'm going to wrap up just in the interest of time. I really want to ask the audience obviously in a round of virtual applause and joining me in thanking really what is an incredibly talented panel of experts for their insights on PBR and for spending the time this morning, particularly Dr. Ford who's three hours behind and woke up especially early for us. So thank you very much. I'd also say as is clearly evident from the tenure of this panel that this does not work as a monologue. And so I would also extend thanks to our sectors for their ongoing support and patience as we work at FSRA to implement PBR and achieving our shared vision to get to those desired outcomes, to protect rights and interests of consumers, make sure the market is sufficiently innovative and competitive, and obviously also promoting high standards of business.

So I wish to thank you for giving us the time this morning. And I'm gonna turn it over to Glen now for introduction to the next session, or I believe we go to break.

Glen Padassery:  Thanks, Jordan. And thank you our esteemed panel guests who joined Jordan today. I think it was a really instructive dialogue. We are trying to maintain our timing for the event and so we're about to go back on break and we will return at 11 a.m. sharp, so I have 10:56. So we're returning in four minutes. So thank you for your patience and we'll be back in a couple of minutes.

2022 FSRA Exchange Event – 04 Innovation Discussion

We -- welcome back everyone. So the next session is something that's really important to everyone here at FSRA and I’m sure for the regulator sectors. One of our key priorities is to help Ontario become a leader in financial innovation in Canada and around the world. To ensure that consumers across the province have access to the latest advancements in financial services while protecting the public interest, we are gonna talk to you about what we are doing and explore the FinTech landscape in Ontario.

I am pleased to introduce Marlena Labieniec, the Director of Innovation at FSRA. She will be joined by Layial El-Hadi, the Executive Director of Fintech Cadence, and Elvis Wong, the Director of Financial Health at Fintech Cadence. Over to you, Marlena.

Marlena Labieniec:  Thank you, Glen. And I will just wait for my colleagues -- for my panel to show up.

Good morning everyone, and thank you again, Glen, for such a warm introduction. As Mark mentioned at the start of this morning's conversation, the innovation office has just officially released FSRA's innovation framework. And to really quickly remind you all, the objective of the framework is to set clear expectation and guiding principles to help market players bring innovative products in a sustainable, responsible, and accessible way.

The framework speaks to some of the tools and processes we have built to put in place to make this easier and to make it easier for market players to propose new ideas, products, and services while of course we continue to maintain consumer confidence in our financial services system in Ontario. We have also just opened our doors to our test and learn environment. We are launching this as a pilot with scope that is suitable for a pilot. But the goal is to expand -- expand through proactive engagement with sectors and start up growth engines like Fintech Cadence. FinTech Cadence is Canada's Fintech hub, founded in Montreal. Their mission is to foster innovation in the Fintech sector and create world class Canadian Fintechs.

They collaborate with many great talents, start-ups, universities, researchers, VCs, incubators, accelerators, and financial institutions to work and innovate together. Talking about collaboration, guys.

Elvis and Layial, thank you so much for joining me today. I invited you this morning to discuss how you believe FSRA and the innovation office can support start-ups trying to create value and deliver responsible innovation for consumers in Ontario. I would love to get your thoughts on how you think the innovation framework can support Fintechs and Insurtechs and potential challenges that we might be faced with. And lastly, some of the key trends that you're seeing these Fintechs and Insurtechs trying to address and where you see they're trying to derive benefit for Ontario consumers.

So why don't we just dive right in? You guys have provided a lot of great support and insightful feedback throughout our consultation. As you are quite familiar with the innovation framework, often we hear that regulation is seen as a threat to innovation. What do you think of FSRA as a multi-sector financial services regular -- regulator undertaking an innovation facilitation role? What are your thoughts?

Layial El-Hadi:  Hi, Marlena. Thank you very much for having Elvis and I here today and it's been really wonderful listening to all of the panels prior to us as well. So it -- it, you know, to the best of our ability we'll try and give our experiences and our opinions here where valuable.

I think first and foremost it's very important to note that a regular play -- a regulator plays a very tremendous role in the development of Fintech in general. And I think if we understand that and we go into the context of the conversation is that you can't have Fintech in Canada without having regulators. And then you take the next lens and look at so is it key as you're asking, Marlena, for us to have -- for FSRA to have an innovation framework? Absolutely. Right? It needs to have -- I think regulators need to have an understand that whether we want to or not -- and I -- I'm assuming everyone on here listening today wants to have innovation happen. Then it's really key to kind of give a playbook or and a positioning of where FSRA stands on it.

And what do I mean by that? I mean that it's really key for, one, internally FSRA to understand why is this important to us? Why do we want innovation to happen? And I think we've already heard quite a few people earlier on today address that particular point. And then internally understand if we agree that innovation needs to happen and we want to support it, then what is FSRA's role internally? And I think that's what the framework serves really wonderfully to do.

But then and more additionally, so, I think what's really key is that everyone else participating in this ecosystem, start-ups, financial institutions, incumbents, et cetera, understand then what is that positioning? And what role can regulation play to not only support innovation but to actually encourage it. And I think that's what we're seeing really wonderfully happen with the framework itself.

Marlena Labieniec:  Thank you. Elvis --

Elvis Wong:  -- And I want to --

Marlena Labieniec:  -- Any thoughts from you?

Elvis Wong:  Yes. I want to add on to that. In the previous panel it was talked a little bit about how not all innovation is beneficial. And what we'll say here at Fintech Cadence is that we believe that regulation is necessary for -- for Fintech innovation in Canada. Because we want the good players to survive and the good players to thrive. And then we don't -- do know that there's other start-ups that might not be in the best interest of Canadians. And we want the regulators to be able to both encourage good innovation to thrive and -- and the bad players to potentially be monitored. Right?

So, I think that any start-up here in Canada, I think there's a bit -- bit of a discussion around how regulation kind of can hurt innovation. But we truly don't believe that's the case. And I think what start ups want isn't -- what they want isn't no regulation. What they want is clear regulation and guidelines so that they know how to operate and what they can do. And -- and it -- more importantly we've talked a lot about principles based regulation. So we -- they want to feel like they're being encouraged by the sector as well. Right? So it's not that they have to follow these rules and these checklists, but that they -- they -- (INAUDIBLE) the regulators are for thinking and what they're doing.

Marlena Labieniec:  Thank you. I think both touched on a very good point, the importance of transparency and clarity as well as ensuring that of course we continue to support and encourage responsible innovation.

So farther to move on on our innovation framework, do you believe it's sufficient and effective in actually helping us achieve our ambition statement in making Ontario a best in class market for financial services innovation? Anything that you would want to take away or mention around that?

Elvis Wong:  Yeah. So we reviewed the framework in detail and we think it's very comprehensive. So we really -- really appreciate the approach that's being taken where it's both -- I believe you mentioned it's proactive internally. So really it's FSRA thinking about what are some of the things that we can see in the credit union sector and the mortgage sector and the insurance sector, seeing some of these changes are happening elsewhere globally, and then being proactive and thinking of how we can adopt a regulation so that it makes sense for Ontario.

But at the same time also making sure that you're engaging with us, like Fintech Cadence, and external stakeholders for that outside in approach as well. So we think it's comprehensive from that standpoint and then also from the element of really, like, being mindful of both the financial institutions that are in the room today and what they're trying to do, but also what Fintechs are trying to do and trying to take in both perspectives.

So we really -- we like the comprehensive element. I think the challenge -- the framework is -- is sufficient. The challenge is actually getting it to be actioned upon and -- and really actually starting doing the work.

Layial El-Hadi:  Yeah, and if I can just jump in here on that last note Elvis, that -- that's exactly it, right? So a lot of work, and we know, Marlena, a lot of work went into this framework. And I think the ability to leverage it now and be transparent to all the stakeholders in a manner in which they understand what it means, you know, I think something we always see with Fintechs is they hesitate to engage with regulators because they find it very complicated. These are not individuals who know how to navigate compliance. They don't necessarily know how to navi -- or understand what role regulations might even play.

And so we're really starting at talking to entrepreneurs at a level of this is what a regulator's role is. And on top of that, this is how the innovation framework that we've developed, how it's gonna help you thrive. And what exactly it means for you. I think sometimes Fintechs will not only not understand regulation but think it comes with a big price tag with it as well. And I think once they start getting that anxiety of, okay, well regulation means compliance. Does it mean I have to hire lawyers? Does it mean I need to pay for somebody to manage this process for me? And I think once entrepreneurs see that or have that misconception they really take a step back and say, okay, well that's a problem I'm gonna try and deal with when it really arises. Whereas with this innovation framework if it -- it's implemented the way it's been designed to, if it's really transparent like Elvis mentioned from the very beginning, and simplified, I think Fintechs would be more willing to engage in the conversations. As -- as will other stakeholders as well.

Marlena Labieniec:  Right. And we've noticed that happen more organically with the establishment of our office. The outside in approach that you mentioned that's reflected in our framework is key for us to ensure that there's an understanding and opportunity for collaboration. And an open door policy. Through hubs like yourself and others we have been engaging in building that relationship with -- with Fintechs and Insurtechs to better understand some of the innovations that they are trying to address and problems to solve for. But of course where does the regulatory friction happen and how then we could best support it and our tools and processes and elements of the framework were built upon that.

So thank you very much for sharing because I think that we also think that is key. So we talked --

Layial El-Hadi:  -- Yeah so when you --

Marlena Labieniec:  -- Oh sorry. Go ahead.

Layial El-Hadi:  I was just gonna add, I think what you said there is really key. Being top of mind is what's really gonna help the success of this framework. And what's really gonna help innovation in Ontario in general. Right? I think with the announcements and the publicity around it. That's wonderful. I think start-ups will hopefully engage with you like you're seeing consistently and you guys are being proactive by working with organizations similar to us. I think it needs to happen consistently, whether it's a monthly reminder, you know, FSRA exists, this is why you should be engaging with us. This is how you can engage with us. And it's consistently being placed as top of mind. I think that would also ensure the success of the implementation of the framework.

Marlena Labieniec:  Okay. Great. I think that's -- so I think you've somewhat addressed some of the challenges or not even challenges but some of the considerations that we have to keep in mind as we now move to the implementation stage. A consistency, transparency, open communication, and anything else that you would advise us to focus on or maybe take away to ensure that Fintechs and start-ups also feel supported.

Layial El-Hadi:  Yeah, I can jump in first, Elvis, if you don't mind and then please feel free to add on anything. I think you also -- and again, not to be too repetitive here, Marlena, but you also touched on something that's really key, and that's the friction point.

So what is the regulatory friction point that some of these start-ups are facing is also really important. I think, you know, we've talked about quite a few start-ups having challenges in navigating this. But it's again lack of understanding perhaps from their side. And in all tren -- in all honesty, tre -- a lack of understanding perhaps from regulators of what is that process. What is the urgency needed in terms of them building a product?

Entrepreneurs are concerned of paying their employees, getting sales, develop -- product development, so at what point do they need to engage with regulators? And that is their responsibility and accountability. But also for the regulators and FSRA here as particular leaders say, okay, this is what it means to develop a product in cybersecurity. This is what it means to develop an Insurtech product. This is what it means for them to collect data. This is what the product -- this is the technology that they're using. This is the artificial technology components that they're utilizing. So that when you guys are in conversation with each other it's easier for the start-ups to be able to explain what could potentially be the friction point and then feel supported and understanded by the regulators and -- and of course vice versa.

Marlena Labieniec:  Thank you. Thank you for that.

Elvis Wong:  So on that note --

Marlena Labieniec:  -- Yep --

Elvis Wong:  -- I think that one of the things we wanted to bring up was how ambiguous regulations in the past have hurt Canadian Fintechs. So not necessarily in -- in Ontario and in -- in the insurance space or -- or FSRA is a domain(PH). But definitely there's been quite a few start-ups that we know of that have launched in Canada, launched in Ontario, were successful in getting customers, helping them. But because of unclear regulations around -- in their -- in their cases open banking, unclear regulations around what they can do, they have actually moved to the U.S. to serve U.S. customers.

So there's a couple of examples with NorthOne which first moved from Quebec to Ontario to the U.S.. Thrive Savings is another example, or some of our start-ups have actually shut down because they just felt like they couldn't operate under that regulatory environment. And it was purely cause of regulations, not because of customers, not because of funding. But because of that -- because of just unclarity in the -- in that sense in the open banking sense. So I think that there's really the challenge would be just making sure that there is the clarity and guidance for these innovations to happen as -- as Layial talked about.

Marlena Labieniec:  Thanks --

Layial El-Hadi:  -- Yeah and -- yeah.

Marlena Labieniec:  Go ahead.

Layial El-Hadi:  I think this meeting -- this whole panel is gonna be me cutting you off, Marlena. I apologize. I was just gonna add (INAUDIBLE) in terms of -- in terms of that as well it's -- it's -- sometimes it's the start-ups not understanding or not being able to navigate the regulatory landscape. But it's also other stakeholders that could potentially be partners or customers of these Fintechs not also wanting to dabble in the, you know, in any wri -- ba -- bad waters if you will in reg -- in terms of regulations. And of course usually we see incumbents fall into that bucket or financial institutions, rather, credit unions, whomever, who are hesitant to shake up any regulations because they have a lot more to lose than perhaps a Fintech with a smaller number of clients, et cetera.

And so I think, you know, we're talking about innovation and the landscape of Fintechs and Elvis mentioned some great examples of Fintechs that have had to go over to the states for -- with their customers or to navigate the la -- regulatory landscape. But it's also very key that we ensure that the incumbents as well know how to navigate in -- innovation regulatory landscape as well so that they can also leverage the Fintechs that are currently building new and exciting products.

Marlena Labieniec:  Right. And our framework definitely addresses both. And making sure that both parties have an equal playing field. As we not only support innovation but al -- also open the door to our test and learn environment where we're be able to more -- where we'll be able to test some of these innovations and pilots under -- under a defined -- under defined parameters. And -- and ensure that it's data driven results that we're obtaining.

Layial El-Hadi:  Yeah.

Marlena Labieniec:  So, moving on you guys financial ca -- Fintech Cadence started in Quebec where you have built excessive partnerships and various programs with AMF and variety of other key stakeholders in this ecosystem.

Can you maybe speak to some of your lessons learned from there? Some of the key takeaways that we should be considering based on your experience with AMF in -- in Quebec.

Layial El-Hadi:  Yeah, absolutely. I mean, I think obviously having common built our organization in Montreal we have a lot of positive things to spe -- say about how the collaborative ecosystem has helped Fintech in general.

Now I'm very much here looking at it from a Quebec landscape, so please keep that in mind as you're listening to the responses here. But I think one of the reasons why the landscape in Quebec and particularly in Montreal has been able to thrive it's because the stakeholders have all been from the very, very early days in conversation with each other. And what I mean by that is venture capital and funders are talking to financial institutions to see well what are the challenges, what are the products you could potentially be using?

Fintechs are talking to financial institutions. Fintechs are talking to venture capital or funders. And of course and very key aim at this part of all of these conversations, right? So I think one of the things we've seen work really well is the AMF -- very similar to what FSRA is doing now, coming in and saying this is why innovation is important and we really want to encourage innovation. But the top of the line is like you said is consumer confidence. And so how are we able to do that properly? And then the other component that I think made AMF quite successful is they didn't have the answers to everything. They didn't necessarily know what is the technology being integrated in all of cryptocurrencies for example. I know that was one of their strategies in the early days.

They, you know, there was a humility around how they spoke to Fintechs to be able to understand the technology and the products and what can actually be the impact on consumers. I think we -- we're gonna pretend or we're -- we're gonna go on the assumption that a lot of Fintechs when they're building their solutions are doing so with the best of intentions. However, the might have blind spots that they're not aware of. And I think what we've seen work very, very well in Quebec is then the AMF has been able to be in conversations with these Fintechs and say these products are great, however you're missing this blind spot or this blind spot.

And the only they've been able to do that is because they were in conversation with the Fintechs from the very early days. They were always transparent about their view on innovation is important, but we have to be careful with the speed of it. And I think Fintechs were always comfortable going to them because they knew exactly who to go to and they could see the presence of the regulator in all other conversations. And I think if, you know, if -- not to harp too much on this, but I think if the Montreal ecosystem has been successful if you look at it as a success then it has been so because of all of these conversations consistently happening, a lack of silo-ness if you will, and an openness for all stakeholders to learn from each other and to understand that competition is good but not to the point where we're hindering a city or a province in order to develop innovation solutions.

Marlena Labieniec:  Yeah. So what I'm -- and I -- I, you know, we've talked about this many times and wanted to make sure that as we engage proactively with -- with Fintech and Insurtech hubs and innovation centers that the collaboration is -- is key. And as you said, having a seat at the table, right? I think there's learning on both sides. Learning for us to better understand, again, what these innovators are trying to address and what problems they're trying to solve from a consumer perspective. And then also for others on the other side of the table to ensure that they have clear understanding and transparency around regulation and how can it potentially impact what they're -- what they're building.

Elvis any --

Elvis Wong:  -- Yeah --

Marlena Labieniec:  -- Have any thoughts from you?

Elvis Wong:  No, I fully agree with Layial and I think it's -- it will be exciting to have FSRA engage on the ground with -- in Ontario and really replicate some of the work that we've done in Montreal and Quebec. So obviously Layial is -- is in -- is in Montreal but I'm actually from the Toronto ecosystem, right? And it -- I think it would be exciting because I do think that in Ontario we do have a very successful Fintech space. We have some great Fintechs that have gotten a lot of funding. But what I've found at least is that it's not as open as the Montreal ecosystem.

There's certain players that -- that get a lot of support but if you're a new Fintech it's very hard to break through. And part of that is because you -- you -- there isn't right now as much of that connection. So it's good for us to establish that so that people know where they can go, have that open door policy with FSRA and potentially other regulators in the future as well. And I think that will just provide a lot more clarity for -- for a new entrepreneur to actually get started and know what they're doing and have -- have a plan for a year or two down the line.

Marlena Labieniec:  Great. Thank you. And Layial, sorry. I cut you off right before I went to Elvis, so I just wanted to make that I give you an opportunity to raise anything that -- else that you wanted to raise.

Layial El-Hadi:  No, that's fine. Actually maybe it was for the better cause I was gonna go on a whole spiel about how, you know, we're very bullish about the fact that we really think Fintech is -- should be one of the top sectors in Canada. And actually I was just on a call with a partner earlier today saying the exact same thing. And with that in mind I think the more collaborative the ecosystem is across the board -- and sorry if I’m sounding very evangelistic here -- but across the board -- and when I say across the board I truly mean between Quebec and Ontario within Ontario, within Quebec, across Canada. Because when you look at it from what's happening globally as much as I love the Canadian Fintech ecosystem and think we've had some great successes, we're far behind on a lot of different components on a lot of them to be honest.

And so in order for us to start being competitive globally, or more so competitive globally, in order for us to be ahead of the curve, you know, we're already behind -- and I don't want to make this an open banking conversation. But we're already behind in terms of a lot of things that are happening in the UK, Australia, the U.S., Singapore, East Asia, from an open banking and regulatory perspective let alone technology that we're seeing. So I think the best way and the best lessons that we can are the ones happening in Montreal which is that collaboration, implementing that and leveraging the strengths that Ontario has and doing so with a supportive regulatory landscape for lack of a better word I think will only help us be more competitive globally and really addressing consumer needs for Canadians by Canadians which is ultimately what we want especially from a regulatory perspective is the best products for Canadians in the safest way.

Marlena Labieniec:  Thank you. I think excellent, excellent point. So as we -- we have about eight minutes left and I just wanted to make sure that we touch on this last question. As we now move to our third year of the pandemic a lot of consumer behaviors have -- have fundamentally changed and were forced to change due to COVID. Unlike the urgent switch from people based business doing online digital platforms that happened in March 2020 what are some of the new trends and challenges that you're seeing at the -- these Fintechs and Insurtechs are trying to address? And where are they trying to add value or drive value for consumers?

Layial El-Hadi:  Perfect. Elvis, you want to start and I'll --

Elvis Wong:  -- Sure, I'll start it --

Layial El-Hadi:  -- (INAUDIBLE) After you.

Elvis Wong:  Yeah. I can go first. So my role at Fintech Cadence is the Director of Financial Health. So I'm really thinking of which start-ups are improving the financially -- financial lives of financially vulnerable Canadians? I -- I think one of the interesting things about Fintech is looking at how Canada's changing, figuring out which markets are currently underserved, and addressing those issues. So in this space a lot of Canadians are becoming freelancers, gig workers, self-employed. There -- it's -- it's just rarer now to be full time employed in a job for the pa -- past 20 -- for 20 years.

So that obviously affects pensions. That affects insurance that you have access to. So at least what I've been interested in, I've been seeing a lot more start-ups that are focused on niche -- what we traditionally would say are niche markets. But self-employed, freelancers that are growing. Right? And figuring out how do we provide insurance for the self-employed? For example, the non-profit industry, a lot of non-profit workers are actually contract workers. So they won't have access to retirement savings pensions. So how do you provide portable benefits, portable plans for some of these workers so that we -- we support -- support our -- our workforce, right?

So that's just one segment. But we also have other Fintechs thinking of newcomers, thinking of racialized(PH) Ca -- Canadians, thinking of we had one start-up that was focused fully on temporary for -- foreign workers here in Ontario in Canada where we have every year we have workers come from Mexico and -- and different places in Latin America. And they're actually here year after year for the summer. And they -- there's financial services that -- that they need that they're being underserved by the current ecosystem. So what are these segments and trying to address -- address some of these concerns is what I'm excited about in the ecosystem.

Layial El-Hadi:  Yeah, and then --

Marlena Labieniec:  -- Layial, over to you.

Layial El-Hadi:  Just to add. Perfect. So just to add a bit -- di -- a bit of also perspective there, so that's -- I -- I think, Elvis touched wonderfully on some of the consumer needs as well. Maybe I'll just add two things as we're starting to see as well a lot of consumers are becoming more and more digital -- digitally savvy, are expecting a lot more from their financial -- not only from their financial services but all the experiences and ton -- touch points that they have with any kind of financial service as well.

So we're starting to see that. We're starting to see a bit more awareness in terms of what's happening globally as well so Canadians are able to compare and contrast the services. And then of course we've had these stories come up, you know, with GameStop and investments and all of these components as well happen throughout COVID. So I think consumers are also wondering what does investment look like for them when something drastically happens like a pandemic, how prepared am I? How much insurance do I have? And so we're seeing a lot more Insurtech Fintechs and a lot more solutions come and address those.

But I will say now unfortunately three years into this nightmare if you will we're also seeing some of the Fintechs move away from consumer based solutions. So -- and con -- other than the ones that Elvis had already addressed. And we're starting to see them move to more smaller businesses, entrepreneurs, and more B2B solutions as well. So we're starting to see that shift and that's really dependent on two things. One, more people from industry pro -- building and providing those solutions. But also it's quite challenging to build a very successful Fintech start-up directly to consumers. And so we're starting to see some of the entrepreneurs who've been in the space for a while pivot a little bit more to businesses and understanding what the requirements are there. Because there is usually, and I say this with a hesitation, but usually you'll see more success rates with businesses, specifically because of the regulatory landscape and because of the -- the landscape in general here in Canada.

Marlena Labieniec:  Right. And maybe if I could maybe add to what would you feel that it's also consumer education is such a big piece, an important piece in all of this. Right? Because as, you know, things are changing so quickly are we ensuring that the -- there's enough consumer education around -- around these new product or businesses or new services? Right? The trust piece is such an important piece especially when it comes to finances.

Layial El-Hadi:  Yeah. And, you know, you're hitting on --

Elvis Wong:  -- Exactly.

Layial El-Hadi:  Elvis, go ahead. Please go ahead.

Elvis Wong:  No, I -- no, exactly. We think it's im -- like, so important for Canadians to be digitally literate to understand now when you can do so much on your phone with these apps, to really understand what they're getting into. Actually interestingly enough, earlier this week we were in a conversation with the financial consumer agency of Canada. And we're talking about this, how there needs to be a role for someone in Canada to really help Canadians understand Fintechs and product and services in general and understand whether it's good or bad for them and fi -- and being able to actually assess that.

And -- and there needs to be some unbiased sourced that can help -- help Canadians navigate this landscape for sure.

Marlena Labieniec:  Thank you. So as we wrap up, Layial and Elvis, I wanted to thank you for joining me over this half an hour. For one of the many more -- many -- more discussions that I believe you will have and will need to have around how do we support innovation and how do we -- how -- enable innovation within our financial services sector. And -- and if any call to action that, you know, individuals on the other side could take for -- away from this our office is open for collaboration and discussion. We have our innovation office website. That is live. We have contact information on the website.

We also have FAQs on our test and learn environment as well as a quick summary of the framework. If you haven't read the detailed document. So I -- I invite you to have a look and I also invite you to get in touch with us on your exciting opportunities.

Thank you very much, again. And Glen, over to you.

Glen Padassery:  Thanks, Marlena. And thanks, folks from Fintech Cadence. That was a great session and really informative. I just wanted to remind folks again who took the time to provide some questions through the question and answer box, we endeavor to respond to all of those questions and get back to you when we start posting the materials on the FSRA website. So rest assured we've been capturing everything and the teams will be going back and providing responses.

And I know there was one question that I can quickly answer. It was how do you spell Fintech Cadence? And the Cadence part is C-A-D-E-N-C-E. So anyone who wants to check out the Fintech Cadence website please feel free to do so.

So again, thank you, Marlena and team, for a great session.