OSC Warns Portfolio Manager Over Client Service, Fees, AI Use
The Ontario Securities Commission (OSC) has flagged a portfolio manager with an advisor-to-client ratio of 1:600, raising concerns about the quality of service provided to clients.
According to the OSC Staff Notice 33-762, released on October 7, 2026, the annual report of the OSC’s Registration, Inspections and Examinations (RIE) Division for the fiscal year ended March 31, 2026, this portfolio manager offered discretionary managed accounts across a broad range of securities.
Overburdened advisors and fee discrepancies
In addition to staffing concerns, the OSC found instances of management fees not aligning with the fee schedules provided to clients. The report mandates that clients receive 60 days’ written notice before any fee changes.
Whistleblower protections and AI scrutiny
The OSC also addressed whistleblower protections, noting that some firms had employment agreements attempting to restrict staff from reporting violations. The OSC warns that it may take enforcement action against employers retaliating against whistleblowers, and such agreement terms may be void under Ontario securities law.
The commission’s scrutiny of AI usage in the industry revealed a lack of written policies, inadequate oversight of external AI tools, and unsubstantiated marketing claims. The OSC’s findings on AI are expected in early fall 2026.
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Portfolio Manager Practices and Title Misrepresentation
Some portfolio managers used leverage in managed accounts without assessing its suitability for clients. They also held excessive amounts of clients’ alternative investments in single issuers or sectors. Additionally, job titles were misused, with some associates using “Portfolio Manager” without proper qualifiers, potentially misleading clients about their authority.
Bank dealer examinations and enforcement actions
The OSC, in collaboration with CIRO, is examining five large bank-affiliated mutual fund dealers for high-pressure sales practices, focusing on pay structures and conflict controls. This review began in November 2024 following a media report.
During the fiscal year, the OSC published eight Director’s decisions, including the suspension of Ternion Financial Services Inc. and Alison Travers over concerns related to an RRSP strip scheme. In a separate settlement, Robert Sewell of Bellwether Investment Management Inc. admitted to transferring shares at $0.37 instead of the recent price of $1.35.
The Client Relationship Model Phase 3 amendments, effective January 1, 2026, introduce new total cost reporting rules, with the first annual reports due in 2027 for the year ending December 31, 2026.
