Key survey predicts increase in Canadian regulatory proceedings in 2024

Norton Rose Fulbright’s Annual Survey anticipates greater regulatory scrutiny and potential for an increase in governance dispute exposure.

Norton Rose Fulbright’s Annual North American Litigation survey has tracked changes and trends for the past 19 years, delineating and defining the litigation landscape by polling legal professionals at organizations of all sizes across key commercial sectors.

The most recent survey results show that general counsel and in-house litigation leaders are dealing with more regulatory matters when compared to prior years. They also anticipate greater regulatory scrutiny, and the potential for an increase in governance dispute exposure.

Key trends from the survey

Cyber security and data protection

  • 40% of organizations saw their cybersecurity dispute exposure grow in 2023 – more than any other area – as cyberattacks reached record levels and the patchwork of data protection regulations grew in complexity.
  • Cybersecurity, data protection and data privacy also top the list of litigation concerns in the year ahead amid the challenges posed by data management and AI.

Regulation and investigations

The survey reports that respondents are “bracing for a further uptick in regulatory matters in 2024”.

  • A greater proportion of organizations were involved in regulatory proceedings in 2023 versus the previous year, with 61% of respondents involved in at least one, compared to 50% in 2022. The average number of proceedings these organizations encountered also grew – reaching 3.9%, as compared to 3.5% in 2022 and 2.9% in 2021.
  • Class actions around securities and bank and financial fraud are also on the rise.

Environmental, social and governance

As the regulatory requirements around climate and ESG disclosures have started to take shape in Canada, the anti-ESG sentiment has also grown. The report has found that many organizations are increasingly finding themselves caught in the middle. 

  • 33% of survey respondents in Canada expect to see more disputes-related exposure involving ESG matters.
  • ESG reporting will be a key focus in 2024 in Canada, as the Canadian Securities Administrators (CSA) will start requiring mandatory ESG and climate risk disclosure from large Canadian banks, insurance companies, and federally regulated financial institutions.
  • 38% of organizations are also concerned about future ESG class actions as issues such as greenwashing, diversity policies and regulatory compliance, go under the microscope.

Advice for compliance teams

The expected increase in regulatory action in the Canadian financial services ecosystem in 2024 presents both challenges and opportunities for compliance teams. Some key steps that the compliance function could take:

Strengthening proactive measures

  • Implement robust systems to monitor regulatory changes, legal updates and emerging risks;
  • Conduct regular internal audits and compliance reviews to identify potential gaps and vulnerabilities before the regulators do;
  • Ensure strong data governance practices to facilitate timely reporting and implement robust cybersecurity measures;
  • Maintain open communications with regulators, proactively addressing concerns and demonstrate a commitment to transparent compliance.

Investing in resources and technology

  • Expand or retain existing compliance teams to equip them with the knowledge and skills required to navigate the evolving regulatory landscape, eg ESG, AI, crypto;
  • Leverage advanced technology solutions like Regtech and AI to automate manual tasks, streamline compliance processes and improve data analysis for risk management;
  • Foster open communication and collaboration within the organization, ensuring smooth information flow between compliance, legal, business and senior management.

Staying informed about specific regulatory updates and regularly communicating with as well as training staff are also crucial for effective compliance in this dynamic landscape.