The Ontario Securities Commission (OSC) recently published its findings from a focused compliance review of crypto asset trading platforms (CTPs). OSC Staff Notice 33-757 Review of Restricted Dealer Crypto Asset Trading Platforms’ Compliance with the Account Appropriateness, Investment Limits and Client Limits Requirements (the Staff Notice) summarizes the OSC’s findings from the review and provides guidance to help CTPs in meeting their regulatory obligations.
The review found firms had inadequately assessed initial and ongoing account appropriateness, including instances where a CTP took a mechanical ‘tick box’ approach without following up with clients on any inconsistencies. This led to inappropriate client accounts being opened and maintained. OSC Staff also found instances where CTPs did not set meaningful client limits (loss limits) tailored to their specific needs. However, the review found CTPs were keeping in line with their regulatory obligations around limiting the client’s purchase of crypto assets.
During the review, OSC Staff looked at six Ontario-based, registered CTPs to assess their compliance with the terms and conditions of their registration. Following the completion of the review and identification of issues, OSC staff have engaged with firms to resolve the regulator’s concerns. The Staff Notice is intended to provide additional clarity on expectations for compliance with the conditions surrounding account appropriateness, investment limits and client limits.
In the regulator’s view, while the Staff Notice held some positive findings, it also spelt out the need for continued guidance. The regulator advises CTPs to review and assess their practices against the guidance contained in the Staff Notice. OSC Staff will continue to monitor CTPs’ compliance with the conditions alongside other fundamental registrant obligations in securities legislation.
OSC Staff Notice 33-757 Review of Restricted Dealer Crypto Asset Trading Platforms’ Compliance with the Account Appropriateness, Investment Limits and Client Limits Requirements is available for download from the website of the Ontario Securities Commission.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.
