After reviewing OSC’s latest draft Statement of Priorities, which was published in late March, the Portfolio Management Association of Canada (PMAC) has seven key recommendations for the commission.

One of PMAC’s top items, presented in a comment letter dated May 28, is for OSC to “recognize, respect, and maintain the importance of the fiduciary duty owed by registered portfolio managers to their clients.”

This is important, PMAC says, given OSC plans to publish provisions to create a best interest standard in the coming fiscal year, alongside the targeted reforms under NI 31-103.

The details of CSA’s targeted reforms are still unclear, as is the fate of the potential best interest standard. So, PMAC says it’s “keen to understand whether a separate regulatory best interest standard remains the preference of the OSC and the Financial and Consumer Services Commission of New Brunswick.”

Read: What it really means to put clients first

If that’s the case, the association will do “an in-depth review of the revised proposals” and suggests Canada’s regulators examine “the recent publication by the SEC [U.S. Securities and Exchange Commission] of a proposed regulation best interest standard for retail clients for broker-dealers alongside clarification and guidance on the fiduciary duty owed to clients by investment advisers.”

Read: SEC proposes best interest rules for U.S. broker-dealers

In particular, PMAC says, “The SEC has very clearly and deliberately distinguished between the investment adviser and broker-dealer business models as well as their market purpose, and duty of care […].” It suggests OSC and CSA similarly treat portfolio managers and other industry professionals separately, which “avoids investor and compliance confusion.”

PMAC’s other recommendations included: modifying and streamlining outside business activity guidance and requirements; helping firms of all sizes leverage fintech services but also create “technology-agnostic” rules; and ensuring regulations are harmonized across Canada and not overlapping, and that the regulatory burden on the industry isn’t overwhelming.

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The association says some of its recommendations “echo those made in previous submissions” since OSC and the Canadian Securities Administrators are pursuing several long-term projects.

For example, it continues to push OSC to allow for the “registration of advising representatives (ARs) and associate advising representatives (AARs) who perform registrable client relationship management and limited advising activities [but] who do not perform research and stock analysis or make any ultimate investment decisions on behalf of clients.”

This would create two levels of ARs and AARs, the lower of which would have limitations placed on their registration that would require fully registered ARs and AARs to still “approve all decisions to buy, hold or sell individual securities and to approve model portfolio selection and asset allocation or rebalancing.”

PMAC argues its request “will not erode investor protection standards,” given the lower tier of representatives would still be held to NI 31-103 as they helped service clients more efficiently.

The comment period for OSC’s draft Statement of Priorities for the year ending March 2019 ended on May 28. The statement, which OSC calls a subset of its overall business plan, is designed each year to showcase the regulator’s goals and “priority actions” that the commission wants to start and/or complete.

OSC’s main priorities

Alongside its goal to address a best interest standard and continue work on CSA’s targeted reforms, the commission wants to publish “regulatory actions needed to address embedded commissions,” the draft document says. Another priority is to help boost consumer protection through its OSC Investor Office.

Regarding effective enforcement, OSC aims to increase the “deterrent impact” of its actions against firms and individuals by taking on more cases involving “serious securities laws violations.”

As PMAC’s recommendations allude to, OSC also plans to work with fintech businesses and, separately, look for ways to reduce the regulatory burden while measuring the impact of recent regulatory changes, including CRM2 and point of sale initiatives.

OSC also mentions plans to promote cybersecurity and, following the Ontario government’s latest moves in relation to mortgage investments, the commission will “implement the orderly transfer of syndicated mortgage investments to OSC oversight.”

Read PMAC’s comment letter here and the other comment letters here.

Read the OSC’s draft document here.

Also read: Ontario’s latest moves on syndicated mortgages