Thursday was a big day for Canada’s investment industry. Regulators offered up proposals that would mean major changes for many client-facing advisors. Here are the initial reactions of two industry groups.
- Overall, the IIAC supports “targeted reforms” or amendments to specific rules related to the obligations of firms and advisors.
- The key objective will be to find the right balance between additional clarity and simplicity in the rules and limiting detailed requirements resulting in a “box-ticking” exercise, reducing flexibility.
- The IIAC agrees with the BCSC that an overarching client best interest standard is not necessary.
- The CRM rule framework and Point of Sale disclosure rule, the results of an extensive and collaborative rulemaking process, together with targeted reforms of specific rules, will deliver a high standard of advisor conduct, and enable advisors to comply effectively with obligations to deal honestly, fairly and in good faith with their clients, and to act in the best interests of their clients. This will boost investor confidence and strengthen investor protection.
- The IIAC shares the grave reservations of the BCSC, the AMF, the ASC, the MSC, and the NSSC. The proposed client best interest standard would lead to confusion on the part of advisors and clients, creating uncertainty and confusion, with some advisors and firms restricting products and services, and some clients having unrealistic expectations. Litigation and increased legal costs will likely arise.
- The IIAC agrees with the approach of the BCSC:
- First phase: CRM, Point of Sale, targeted reforms
- Second phase: Conduct a cost-benefit assessment
- Third phase: Determine whether there is a “net benefit” to impose a formal client best interest standard
“The investment funds industry shares our regulators’ goal of building advisor-client relationships that lead to good investor outcomes,” says Joanne De Laurentiis, IFIC’s president and CEO. “Canada already has a robust regulatory framework that serves investors well, but there will always be room for improvement. This paper helps us more fully understand regulators’ perspectives on what is needed to achieve those goals and puts the industry in a better position to provide constructive suggestions to further strengthen the framework.”
De Laurentiis says IFIC “will examine both the potential positive and unintended negative impacts of each proposal on investors, as well as the industry, and use these insights to develop a fact-based response and to provide input to the round-tables proposed by the regulators.”