Though it was only introduced three days ago, a new private member bill tabled by Sudbury, Ont. MPP Rick Bartolucci is already garnering industry attention.

If passed, the Financial Advisors Act, 2014, will tighten the rules in Ontario. This includes financial penalties and licence revocation for non-compliant advisor registrants. The bill will also provide the industry with the power to establish a code of ethics.

Read: Ontario MPP introduces bill tightening rules for advisors

Greg Pollock, president and CEO of Advocis, which supports the bill, admits IIROC and MFDA may be concerned the bill would duplicate “what they’re responsible for.”

“We are prepared to help support the dialogue to ensure that any duplication is held to a minimum,” he says. “We are not interested in supporting a bill that’s going to add to the volume of regulation.”

He adds the bill will lead to “quality regulation” because currently, there’s a gap. “The problem is, anyone can hold out as a financial advisor. The actual regulation of advice does not exist. What exists is the regulation of the sale of products like […] insurance and mutual funds. But we don’t have overall regulation of the advice that exists between the client and advisor.”

Read: Clients don’t understand your credentials

So Pollock suggests “it all be combined into one so that you won’t have multiple bodies providing regulation through FSCO, IIROC, and so forth.”

But many are wondering about duplication. Just last year, the Ontario Ministry of Finance began an extensive consultation process to tailor the regulation of financial planners.

“FPSC and our coalition partners have been working extensively for some time on a model of professionalization,” says FPSC’s president and CEO Cary List. “We’ve been reaching out to a number of stakeholders and working very closely with the Ontario government through its consultation process, and I’d prefer to spend my time and energy talking about that.”

Read: Investment professionals are optimistic

So could there be collaboration between that consultation and the new bill?

“It’s premature to speculate,” says List. “There may be some alignment between what the government’s thinking and the private member’s bill, but there may also be none whatsoever.”

Laura Paglia, partner at Toronto-based BLG, adds, “I don’t believe the industry needs another layer of regulation. Those providing financial planning can and should be registered within the regulatory framework already in existence with self-regulatory organizations — IIROC and MFDA being the most likely choices.”

Read: SEC supports fiduciary standard

The new bill is broad, and doesn’t specify penalties. So it’ll be up to the industry, Pollock says, including anyone providing financial advice, as well as the governing council of SROs, to determine the details.

“If there are individuals who don’t have licences, but are still providing broader planning activities, they will be captured by the legislation as well,” notes Pollock.

Read: Lessons from advisors in rural Canada

What is Advocis’ proposed role? The association would provide CE programs, discuss how to bring new advisors into the industry, and mentor and help them build their careers.

“We don’t intend to become the SRO,” says Pollock. “That’s not what this bill is about.”

Over the next month, the bill will be read a second time. If the majority agrees, it’ll be forwarded to a legislative committee, which will examine it, and members of the public will be able to provide input. Then, the committee will send it back to the House for final reading. Pollock says this process could take months.

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The bill includes a long laundry list of exemptions, by process of elimination essentially making it applicable almost exclusively to licensed individuals and corporations involved with life insurance, mutual funds and (some) securities.

Per the current draft of the bill, all the following would be exempted (copy pasted directly from the text of the bill:


4. This Act does not apply to the following persons:

1. A person who deals in securities that are exempt from the prospectus requirement under section 73 of the Securities Act.

2. A person who is authorized to practise law in Ontario.

3. A person who is licensed under the Public Accounting Act, 2004.

4. A person who is a member of the Certified General Accountants Association of Ontario.

5. A person who is a member of the Society of Management Accountants of Ontario.

6. A person who is registered under the Real Estate and Business Brokers Act, 2002.

7. A mortgage broker as defined in the Mortgage Brokerages, Lenders and Administrators Act, 2006.

8. A person who is registered under the Registered Insurance Brokers Act.

9. A person or class of persons exempted from the application of this Act by the regulations.”

I note that the language of #9 above introduces a 10-lane highway for further exemptions going beyond the other practitioners being exempted in #1 through #9.

Take a close and careful look at the exemptions and consider who would be left. In order to achieve the proclaimed purpose of the proposed Act, none of the above exemptions should exist and all who hold out as financial advisors should be included.

While the proclaimed spirit of the proposed act is positive laudable, in practice it seems to be just adding another tier to the regulatory apparatus patchwork – along with its associated costs. For consumers, it is silent on active consumer participation in all phases of the regulatory process; however it seems to add yet another hurdle for consumers who may need to seek redress.

There are some ramblings about an early provincial election in Ontario so this bill may die on the order-table.

Friday, Feb 21, 2014 at 10:22 am Reply