Monday Market Minute | May 23, 2022

OSC intensifies exempt-market oversight as Bridging fallout and crypto failures test regulatory frameworks

What Moved

The Ontario Securities Commission signalled heightened scrutiny of exempt-market dealers and fund managers in its 2022-2023 priorities statement. The convergence of the Bridging Finance receivership, Fortress Real Developments fallout, and the crypto platform failures gave regulators both the mandate and the political cover to tighten oversight. The OSC's Investor Office reported a surge in complaints from exempt-market participants, and the CSA advanced its consultation on crypto trading platform regulation.

Why It Matters

For legitimate exempt-market participants — both issuers and investors — increased regulation was a double-edged development. Tighter oversight would raise compliance costs and potentially slow capital formation, but it would also improve the credibility of the exempt market and weed out bad actors. Private credit and PE managers with strong governance practices stood to benefit from a flight to quality as investors became more discerning post-Bridging, post-Terra.

Signal to Watch

CSA staff notices on exempt-market dealer compliance — any enforcement actions would signal the regulators were moving from consultation to action.

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