Capital markets
Things to know
- In December 2024, the Canadian Securities Administrators (CSA) issued Staff Notice and Consultation 11-348 (the Staff Notice), clarifying how existing Canadian securities laws apply to the use of AI systems in capital markets.
- The Staff Notice underscores the importance of deploying AI systems with a high degree of explainability to promote transparency and assist market participants with satisfying their obligations under securities law.
- Canadian financial institutions, fintechs, market participants, and issuers that utilize AI — either internally developed or through third-party providers — all face responsibility for ensuring their compliance with securities laws.
- Ontario Securities Commission priorities are to support an environment where:
- the deployment of AI systems enhances the investor experience while the risk of investor harm is addressed
- markets can benefit from potential efficiencies and increased competition brought on by the use of AI systems
- regulatory clarity supports capital formation in this sector
- any new types of risks, including systemic risks, are appropriately mitigated
Things to do
- Disclosure obligations: Identify and comply with disclosure obligations in respect of the use of AI, be transparent to investors and/or clients about how AI systems are used, any associated risks, and risk management activities, as highlighted by the Staff Notice.
- AI governance: Develop and implement comprehensive AI governance frameworks to guide AI system planning, design, verification and validation. AI governance policies should be aligned with the Staff Notice recommendations.
- Oversight mechanisms: Establish robust oversight mechanisms, in alignment with the Staff Notice recommendations which includes human-in-the-loop, AI literacy, and risk training.
Useful resources
- “CSA Staff Notice and Consultation 11-348 – Applicability of Canadian Securities Laws and the use of Artificial Intelligence Systems in Capital Markets,” Ontario Securities Commission, December 2024
- “Navigating AI systems in capital markets: recent guidance from the CSA,” Osler Risk Management and Crisis Response Blog, December 18, 2024
- “Artificial Intelligence in Capital Markets: exploring use cases in Ontario [PDF],” Ontario Securities Commission and Ernst & Young LLP
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