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CSA is proposing heftier disclosure for firms offering only proprietary product in its latest consultation paper. It’s also tackled the best interest standard.

Under the proposals, firms would have to identify whether they have a proprietary or mixed/non-proprietary product list. CSA says it’s doing this to ensure firms that present themselves as offering more than proprietary products are actually doing so meaningfully. But CSA also points out that such a requirement could cause firms with mixed shelves to stop offering non-proprietary product in order to fit the definition of a proprietary firm.

Doing so would create other responsibilities. Proprietary firms would have to disclose to clients that their product list is limited, and that “the suitability analysis conducted by the firm and its representatives does not consider the larger market of non-proprietary products, and whether such non-proprietary products are better, worse or equal in meeting the client’s investments needs.”

Meanwhile, firms that are only mutual fund dealers, exempt market dealers, scholarship plan dealers or restricted dealers/advisors must disclose that they offer a limited  product range and, as a result, the client’s suitability analysis doesn’t consider a full range of securities products, and whether other products are better, worse or equal in meeting the client’s needs.

And, to further communicate this to clients, CSA recommends that advisor titles change under one of three options:

Option 1

  • securities advisor – portfolio management for discretionary advisors who work for a firm registered as a portfolio manager or investment dealer that has a mixed/non-proprietary product list;
  • securities advisor for reps who aren’t discretionary and work for a firm registered as a portfolio manager or investment dealer that has a mixed/non-proprietary product list;
  • restricted securities advisor for reps who work for a firm that isn’t an investment dealer or portfolio manager but has a mixed/non-proprietary product list;
  • securities salesperson for reps who work at any firm that has a proprietary product list.

Option 2

  • advisor for reps working at IIROC-registered portfolio managers and investment dealers and managing clients with discretionary accounts;
  • salesperson for representatives of any other firm.

Option 3

  • representatives could only use their category of registration (e.g., dealing representative and/or advising representative).

Read: OSC pressured for best interest standard

Further proposals include:

  • Advisors would have to identify if a client would better meet her goals by not transacting in securities and instead paying down high-interest debt or putting cash into a savings account, for instance.
  • Advisors should update their client’s KYC information at least once every 12 months, and more frequently if a client’s circumstances change materially. Advisors should also have sufficient product knowledge.

Advisors and industry players have 120 days to comment.

Read: How will the best interest standard affect you?

In addition, the consultation paper includes a proposed regulatory best interest standard, accompanied by guidance, that would form an over-arching standard and governing principle against which all other client obligations would be interpreted.

U.S. regulators unveiled their own best interest standard for advisors earlier this month.

Both the proposed reforms and best interest standard, if introduced, would apply to all advisors, dealers and representatives, including members of IIROC and MFDA. CSA intends to work with the SROs to ensure their rules are harmonized with the CSA’s requirements and are implemented on the same schedule.

Read: IIROC backs CSA call to enhance obligations towards clients

This consultation paper follows extensive research and outreach by CSA staff and specific CSA jurisdictions, as well as a review of international developments regarding the client-registrant relationship.

The CSA welcomes feedback on the consultation paper, which includes a list of 68 consultation questions. Comments should be submitted in writing by August 26, 2016.

The CSA also plan to hold roundtables with market participants in fall 2016 to discuss issues raised in comment letters.

Originally published on Advisor.ca
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GREG.RASMUSSEN.11

Of all the knuckleheaded ideas this is actually one that makes sense. Tell people what you are and aren’t able to sell or deal in…..ABSOLUTELY!

Thursday, Apr 28, 2016 at 2:43 pm Reply

SMELLY

Geez!!! These knuckleheads have WAY too much time on their hands. They continue to implement useless regulations based on what the media tells them is important. Have any of the regulations implemented in the past 20 years stopped even one crook from swindling an investor? The answer is NO!

Thursday, Apr 28, 2016 at 2:25 pm Reply