TestLab 2022

OSC TestLab 2022 tested RegTech solutions focused on helping registrants better understand their clients and products and contribute to better client outcomes.

TestLab’s inaugural test took place from June to December 2022 and explored the potential of RegTech to address two problem statements:

Seven RegTech providers, ranging from start-ups to large multinationals, tested solutions with Ontario registrants and investors as part of TestLab 2022. The OSC Innovation Office observed testing and facilitated dialogue and collaboration among test participants and subject matter experts from across the OSC.

TestLab 2022 highlighted the significant and varied opportunities for RegTech solutions to support registrants and investors in Ontario's capital markets. From onboarding and risk assessments to product research and comparisons, the Innovation Office heard that RegTech has the potential to enhance client engagement and improve efficiency in key aspects of a registrant’s operations.

Ongoing feedback from the testing process helped test participants improve their solutions and helped the OSC gain insight into the challenges and opportunities for RegTech innovation and adoption in Ontario’s capital markets.

Key insights that emerged from TestLab 2022

Reflecting and building on TestLab 2022, the OSC Innovation Office identified four ways to better support RegTech innovation, through:

Know-your-client (KYC), know-your-product (KYP) and suitability obligations are among the most fundamental obligations owed by registrants to their clients. However, this is also an area where registrants have experienced compliance challenges. These challenges highlighted an opportunity for improvement.

Amendments to the KYC, KYP and suitability obligations arising from the Client Focused Reforms (CFRs) came into force on December 31, 2021. These amendments updated registrant conduct requirements to better align the interests of registrants with the interests of their clients, improve outcomes for clients, and clarify the nature and terms of their relationship with clients.

These developments suggested the timing was right for market participants to consider new solutions and alternative approaches to meet these obligations and evolve their processes.

We listened to your feedback

Through OSC LaunchPad, we learned that technology providers are finding it difficult to engage with registrants to test their solutions, in part, because registrants may be reluctant to try new technologies without the involvement and guidance of the OSC. This highlighted the potential for OSC TestLab to help.

To further develop this theme into problem statements for solution-focused testing, we obtained input from stakeholders through a feedback survey earlier this year. In total, 128 registrants, 8 technology providers and 256 individual investors responded and provided feedback on the challenges they see around registrant-client interactions and related regulatory requirements.

While the survey responses are not representative of all potential views, the survey did provide a window into how certain market participants are viewing these issues and highlighted opportunities for the development of innovative solutions that can improve current processes.

A majority of the registrants who responded believe that technology can help them improve processes in a number of areas. Similarly, investors were generally of the view that the adoption of technology by their dealers and advisers could provide a better overall experience and improve outcomes.