The strongest message in the OSC’s 2026 report is not that investment management regulation is tightening. It is that product innovation, market growth, and regulatory oversight are advancing together, and firms need controls that can keep pace.
A Market That Is Growing… and Changing
The Canadian investment fund market continued to expand during Fiscal 2026.
Public investment fund assets under management reached approximately $3.4 trillion as of March 31, 2026, up from $2.9 trillion a year earlier.
ETFs saw the largest movement.
ETF assets increased from approximately $546.9 billion to $771.1 billion, representing a 41% increase during the year. ETFs now account for 23% of public investment fund assets, up from 19% a year earlier.
Conventional mutual funds remain the largest segment at approximately $2.5 trillion in assets, although their market share declined from 79% to 75%.
The product mix is also changing. For the third consecutive year, newly launched ETFs exceeded conventional mutual fund launches, while alternative investment fund launches increased to 128 funds, representing 33% of new funds receipted during Fiscal 2026.
The practical implication is clear: market growth is increasingly occurring alongside greater product complexity.
For firms, that places more pressure on product governance, disclosure, liquidity management and the controls surrounding distribution.
Product Innovation Is Clearly on the Regulatory Agenda
The report highlights several products and structures that received regulatory attention during the year, including:
collateralized loan obligation ETFs;
Solana and XRP ETFs;
3x daily leveraged ETFs;
single-issuer ETFs; and
other alternative investment strategies.
The OSC’s approach to these products is notable.
The report reflects an effort to facilitate innovation while addressing the investor-protection issues that can arise from more complex products.
For example, the first Canadian 3x ETFs followed extensive confidential pre-filing reviews. The report notes measures including prominent 3X identification in fund names, enhanced risk disclosure in ETF Facts documents, and undertakings relating to investor information.
For managers considering novel products, one practical point stands out.
The OSC specifically recommends using the confidential pre-file process for unique or novel products because these filings often require in-depth review and coordination with other CSA regulators.
From an execution perspective, this suggests that regulatory planning should begin early, rather than after the commercial structure has already been finalized.
Regulatory Oversight Is Becoming More Data-Driven
One of the more important themes in the report is how the OSC is identifying risk.
The Investment Management Division completed 235 continuous disclosure reviews during Fiscal 2026, an 18% increase from the previous year.
The report also describes the OSC’s use of Investment Fund Survey data and other analytical tools to identify funds that differ from peers or regulatory expectations.
During the year, staff conducted outlier analysis in areas including:
portfolio liquidity;
cash borrowing;
total borrowing and short sales; and
aggregate exposure to borrowing, short selling and specified derivatives.
Where outliers were identified, staff reviewed prospectuses, continuous disclosure documents and portfolio holdings to understand the result and determine whether regulatory requirements were being met.
The majority of funds reviewed were compliant. In some cases, the outlier status resulted from exemptive relief, classification errors, clerical issues or temporary fluctuations.
That is an important supervisory signal.
The OSC’s use of outlier analysis shows that unusual data patterns can prompt further regulatory review even where the fund is ultimately found to be compliant.
For compliance and risk teams, internal trend analysis and benchmarking may therefore become increasingly valuable.
Liquidity Deserves Continued Attention
Liquidity appears repeatedly throughout the report.
The OSC used Investment Fund Survey data to examine shifts toward less-liquid portfolio holdings. Liquidity is also central to the CSA’s ongoing liquidity risk management work and to the OSC’s Long-Term Asset Fund Project.
The proposed liquidity risk management framework focuses on three areas:
formalizing liquidity risk management frameworks;
enhancing operational practices, including stress testing; and
strengthening governance and oversight.
The report also notes that discussions concerning potential long-term asset fund structures have included valuation, transparency, liquidity and redemption risks associated with illiquid assets.
For IFMs, liquidity is therefore not only a portfolio-management issue.
It is increasingly connected to governance, disclosure, oversight and operational resilience.
Marketing and Social Media Are Part of the Compliance Perimeter
One of the most immediately actionable sections of the report concerns sales communications.
OSC staff continued reviewing investment fund marketing under Part 15 of NI 81-102 and identified instances of non-compliance in communications distributed through fund-manager websites and social-media platforms, including YouTube and LinkedIn.
The report identifies examples involving performance ratings or rankings without satisfying applicable disclosure requirements, as well as performance data used for funds that had not distributed securities under a prospectus for the required period.
Where issues were identified, communications were amended or removed.
The OSC also notes that continued non-compliance may lead to referral for further regulatory action. In some cases, staff may request that an IFM issue a news release relating to corrections and may place affected investment fund issuers on the Refilings and Errors List for three years.
This is a useful reminder for firms with active digital-marketing programs.
Social media may feel informal because publishing is immediate. The regulatory requirements are not.
The key question is whether website, LinkedIn, YouTube, and other marketing content is subject to a review process that can identify the same issues caught in traditional sales material.
Compliance Reports Are Also Providing a Supervisory Signal
The OSC reviewed compliance reports filed during 2025 and noted that 42 fund managers reported issues or exceptions.
Most were related to overdraft positions caused by timing differences in cash movements and delays in paying subscription or redemption proceeds.
The report also notes that four fund managers reported commingling-of-cash issues and three reported lapping issues.
Importantly, the OSC states that where deficiencies are significant, recurring year to year, or serious, staff may consider further regulatory action or referral for a focused compliance review.
The practical point is not that exceptions must never occur.
It is that recurring exceptions should lead to a deeper question:
Has the underlying control weakness actually been remediated?
Ownership Changes Still Require Better Regulatory Preparation
The report also highlights continuing issues with notices filed under sections 11.9 and 11.10 of NI 31-103.
OSC staff note that registrants continue to omit relevant facts needed to assess proposed ownership changes or asset acquisitions.
The report specifically refers to insufficient explanation of how material conflicts arising from proposed transactions have been, or will be, addressed in the best interests of clients.
Incomplete information can delay regulatory review.
The OSC also reminds firms that missed notices for completed transactions may require retrospective filing and payment of applicable fees and may result in warning letters or, in limited cases, further regulatory action.
For firms considering transactions, regulatory planning should therefore run alongside transaction planning.
Waiting until the commercial terms are effectively settled can create avoidable timing and execution risk.
The Policy Pipeline Is Broad
The report also provides a useful view of the policy initiatives affecting investment funds and advisers.
Ongoing areas include:
an access-based model for investment fund reporting issuers;
modernization of continuous disclosure documents;
the proposed Fund Report replacing the existing MRFP;
chargeback arrangements;
the next phase of the crypto-asset investment fund framework;
ETF regulation;
liquidity risk management; and
retail access to long-term assets.
The OSC is also examining how conventional mutual funds and ETFs are distributed across different advice and direct-investing channels and intends to gather additional information on managed solutions such as separately managed accounts.
For firms, this reinforces the importance of treating regulatory-change management as an ongoing process rather than something triggered only when final rules are published.
What IFMs and Advisers Should Be Reviewing Now
An annual regulatory report is most useful when firms translate it into questions about their own operations.
Based on the OSC’s findings and ongoing initiatives, compliance and management teams should consider asking:
Are novel products being brought to compliance and regulatory teams early enough?
Can the firm identify unusual liquidity, leverage or borrowing trends before they become regulatory concerns?
Are website and social-media communications subject to an effective compliance review process?
Are recurring exceptions in compliance reports being analyzed for root causes and remediation?
Are ownership-change notices identifying material facts and conflicts early enough to avoid regulatory delays?
Are upcoming policy initiatives being incorporated into the firm’s regulatory-change process before implementation deadlines arrive?
These are not necessarily new obligations.
What is changing is the market context in which those obligations operate: more product innovation, more data, more complex distribution channels and increasingly risk-based supervision.
What the 2026 Report Signals
The OSC’s 2026 report describes an investment-management market that is becoming larger, more innovative and more complex.
It also shows a regulatory approach evolving alongside it.
The OSC is facilitating novel products, modernizing disclosure and exploring new investment structures, while also using data analytics, targeted reviews and risk-based supervision to identify areas requiring closer attention.
For IFMs and advisers, that combination matters.
Innovation and regulatory readiness increasingly need to develop together.
The firms best positioned for that environment will not simply react to individual rule changes. They will understand where their business is changing, where regulatory risk is emerging, and whether their existing controls remain appropriate as the business evolves.
