traffic-slow

The Ontario Securities Commission’s intention to better protect investors is clear in its latest draft Statement of Priorities, says FAIR Canada in a May comment letter. The commission still plans on a best interest standard (BIS) as well as on “implementing a seniors strategy and pursuing proactive compliance, and achieving enforcement case results that have a significant deterrent impact.”

Problem is, OSC is taking far too long to act on its priorities, according to the investor protection organization.

“FAIR Canada, like other investor-focused stakeholders however, believes that actions speak louder than words and that investor-focused initiatives simply take far too long to reach the finish line (regulatory outcomes).” While OSC’s priorities “will have a positive impact on investors,” they’ve been in the works or subject to consultations for years, FAIR writes.

Also read: Don’t prioritize BIS over fiduciary duty, PMAC tells OSC

The main issue is that, the longer OSC takes to implement and carry out initiatives, the worse off investors become, FAIR adds. A slow regulatory pace “also has negative consequences for investors [who] are affected by other emerging and existing issues, which cannot be addressed because work on previous investor protection initiatives has not been completed.”

On the BIS, the organization says it “hopes that the regulatory reforms contain the appropriate mix of broad and specific provisions, so that a meaningful standard, that is clear to investors and registrants, is achieved.”

As well, FAIR encourages the commission to collaborate with the Ontario government, with respect to regulating financial planning and defining the standards for advisor titles and proficiency.

Read: 

In particular, and related to the BIS, it calls for:

  • measures to “prevent the use of a bewildering array of unregulated and frequently misleading titles that falsely convey high levels of proficiency, seniority, experience or authority and do not reflect the standard of advice being provided”; and
  • proficiency standards that require education on topics such as “elder abuse, undue influence, mental capacity issues, enduring powers of attorney and ageism.”

When it comes to OSC’s fine collection rates, FAIR urges the commission to hold firms more accountable. It says it continues to “recommend that firms be responsible for the fines of individual registrant employees. We also recommend that enforcement proceedings that are resolved through settlement agreements specifically address payment of fines to securities regulators and restitution or redress (including financial compensation) to investors.”

Also, it says efforts to boost collection rates, for which there are limited resources, shouldn’t “detract from efforts to identify and stop investors from being harmed by fraud and other wrongdoing.”

Read: Ontario 2018 budget strengthens OSC enforcement powers

To that end, it discusses recurrent topics such as embedded commissions, conflicted compensation structures and OBSI’s power, for which the organization says decisions and solutions are “long overdue.”

Read: OBSI’s top investor complaints of 2017

Read the full FAIR Canada letter.

What OSC’s Investor Advisory Panel says

The Investor Advisory Panel (IAP), formed in 2010, says in its April letter that it sees the commission’s Statement of Priorities as “a well-conceived, thoughtful and aspirational document” that offers “a balanced agenda.”

However, it too says it can’t “ignore the fact that many of the most important investor-protection initiatives have remained unfinished items on the OSC’s list of priorities for years while several market-focused or industry-centred initiatives (for instance, crowdfunding, exempt market expansion, no-contest settlements, gender parity on boards) have received fast-track treatment.”

It also calls OSC’s pace “persistently slow,” noting that the commission’s failure to bring forward solutions “could breed public cynicism about market regulation.”

On the BIS, the IAP cautions the commission against “incorporating best interest principles in the targeted reforms,” given that’s “not a substitute for adopting an overarching best interest rule.”

Read: What it really means to put clients first

Also, similarly as FAIR Canada, the panel discusses embedded commissions and OBSI, and urges OSC to balance its efforts to collect registrant fines with those designed to combat securities fraud.

More effective fine collection is a positive, says IAP, but only “the likelihood of arrest, prosecution and imprisonment can accomplish [fraud deterrence]. Accordingly, we encourage the OSC to be both more aggressive and highly consistent in pursuing criminal prosecutions and seeking substantial prison sentences for securities fraud.”

Read the full letter.

Originally published on Advisor.ca
Add a comment

Have your say on this topic! Comments are moderated and may be edited or removed by
site admin as per our Comment Policy. Thanks!