Canadian advisor regulation on track globally: Report

Canadian advisor regulation on track globally: Report

Canadian advisor regulation on track globally: Report

Advisors, you can rest assured – for now – after a report, released Monday, concluded that Canada’s regulatory system is on track with, or superior to, its counterparts including the United States, the United Kingdom and Australia.

The report – prepared by Toronto-based law firm, Torys LLP, at the request of the Investment Funds Institute of Canada (IFIC) and the Investment Industry Association of Canada (IIAC) – analyzed the obligation financial advisors have to acting in their client’s best interest – a hot topic in the aforementioned countries.

The report sought to address whether it was necessary to implement a statutory fiduciary duty on Canadian financial advisors – an issue outlined in a consultation paper published last year by the Canadian Securities Administrators (CSA).

Comparing fiduciary standards in the U.S., U.K. and Australia, the report found that there is no need for immediate action in this area from Canada. According to the report, the U.S. is still in the exploratory phase of implementing a “uniform fiduciary standard”; the U.K. does not impose a statutory “best interest” duty; while Australia’s statutory best interest standard, introduced in 2012, does not “provide clear guidance as to meaning of best interest.” (continued on Page 2.)


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2 Comments
  • Doug McCaw 2013-11-11 1:52:01 PM
    What is the downside to introducing a "statutory fiduciary duty" on financial advisors? They are dealing with their clients financial welfare. Next to healthcare what could be more important?
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  • Harley Lockhart, CFP, CLU, CH.F.C. 2013-11-13 10:59:02 AM
    Focus on the best interest of the client is foundational for an effective industry. The current situation, based on common law precedent, determines whether an advisor's advice is appropriate based on the facts of the case. My understanding is that a legislated fiduciary duty will remove the facts of the case (education, expertise of client among others) and impose a uniform standard of care in every situation. I find it inappriate, for example, to apply the same standards to the advice provided to an 80 year old widow who has never even written a cheque and her 50 year old son/daughter with an MBA and years of investment experience. In fact, the more detailed the statutory standard, the greater the potential an unethical advisor may find cracks in the rules to avoid the standard.
    The most reasonable approach to me is to set the level of care at placing the client's ahead of the advisor's. If the natural expectation of an action would benefit the advisor more than the client, it would be offside.
    Fortunately for me, and anyone else I may encounter, I am not a lawyer. These are just the observations of a concerned practitioner.
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