Risk-Based Pension Regulation in Ontario
By Mark Newton
On September 21, 2011, the Financial Services Commission of Ontario (FSCO) released its Risk-Based Framework Document, which describes a broad-based framework for the risk-based regulation of pension plans in Ontario. The Framework represents an enhanced form of risk monitoring by FSCO.
The proposed Framework will consider a broad universe of risk factors in areas such as administration, governance, and sponsor related risks. The Framework’s goal is to provide a base level of regulation across all pension plans which will include monitoring key risk indicators, improved dialogue with stakeholders, and promotion of best-practices.
The Framework consists of five components. At its core is the Regulatory Response Model which describes application of risk-based supervision and proportionate responses based on risk. The Response Model is informed by four other components: Risk Indicators, Regulatory Powers, available and potential Data Sources and finally the proposed Business Processes for Quality Control and Framework Maintenance.
Plan sponsors and administrators should review their governance framework to determine whether it is consistent with FSCO’s approach. For more information on the Framework and its components, please see Heenan Blaikie’s Pension Pulse “Risk-Based Pension Regulation in Ontario”.