OSC publishes compliance review findings and guidance for crypto asset trading platforms

TORONTO – The Ontario Securities Commission (OSC) 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 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. Staff also found instances where CTPs did not set meaningful client limits (loss limits) that were 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.

“Account appropriateness, investment limits and client limits are all essential measures to protect investors,” said Matthew Onyeaju, Senior Vice President of Registration, Inspections and Examinations at the OSC. “While some of the findings were positive, it’s clear additional guidance is needed. We encourage CTPs to review and assess their practices against the guidance we issued today.”

As part of this compliance review, staff looked at six Ontario-based, registered CTPs to assess their compliance with the terms and conditions of their registration. Issues were identified, and staff have engaged with firms to resolve our 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. Staff will continue to monitor CTPs’ compliance with the conditions alongside other fundamental registrant obligations in securities legislation.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at https://www.osc.ca.

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