The “most important part” of the the CSA’s best interest regulatory reforms is how advisors deal with conflicts of interest, says Andrew Kriegler, IIROC president.
The regulator has begun working on how to ensure firms have clear policies guiding “compensation-related” ethical conflicts, Kriegler said Monday evening in a Toronto Board of Trade speech.
“To my mind, the most important part of the best interest issue is how advisors must act when their interests conflict or are perceived to conflict with those of their clients,” said the head of the national self-regulatory organization.
The CSA has put forward new principles for registrants, controversially proposing that they generally “act in the best interests of the client,” placing their client’s interest ahead of their own. It has also proposed that advisors “avoid or control conflicts of interest in a manner that prioritizes the client’s best interests.”
The deadline for comments on the proposals is September 30.
Kriegler said registered firms should have and follow “clear policies and procedures on compensation-related conflicts,” and that the words “conflict of interest” should be interpreted not narrowly but “broadly.”
He also expressed support for the CSA’s proposal for a general best interest standard, noting: “We will make certain that our rules and guidance put the best interest of the client ahead of the interests of IIROC-regulated dealers and their representatives.”
The best interest standard is a critical policy debate in Canada and it’s vital for IIROC to have a “strong, principled” position” on it, Kriegler said, according to speaking notes.
He reiterated the regulator’s plans make securities regulation in Canada more efficient by closing gaps, overlap and regulatory arbitrage.
IIROC’s new debt transaction reporting rule — which requires firms to report all fixed income trades — is helpful for market surveillance as well as monitoring system risk, he said, adding that IIROC hopes to “expand and make more timely” the debt securities data available on its website.