In response to the CSA’s Consultation Paper 33-404: Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients
, the IIAC has submitted its comments, saying that some areas warrant support while others need reexamination.
In its submission, the group said it would work with the CSA on reforms that would help improve investors’ experience in all segments of the investment industry. Some examples were the alignment of CSA National Instrument 31-103 with existing IIROC rules that implement CRM and promote their enforcement, enhancing proficiency standards for registrants, and clarifying titles that are generally used throughout the industry.
At the same time, the group aired concerns that many of the new reforms, which “contemplate fundamental regulatory intervention in most aspects of the industry, may inadvertently have an adverse impact on the client-advisor relationship. Specifically mentioned was the introduction of “unnecessary complexity, uncertainty and cost to the established regulatory framework without providing meaningful benefits for investors.”
The IIAC also echoed other CSA jurisdiction in saying that a regulatory best interest standard would not effectively enhance investor protection. They expressed concern that the standard does not align with CRM reforms already taking effect in the industry.
“The broad, sweeping and vague best interest standard has uncertain application which may lead to client confusion and cause negative consequences for investors… resulting in onerous compliance requirements, and increasing exposure to risk and liability for advisors,” said IIAC President and CEO Ian Russell.
Instead, the group suggested that regulators first consider the results of the CSA’s announced multi-year effort to measure the impact of Point-of-Sale (POS) and CRM reforms, using it to determine whether any additional new regulation is needed.
They also suggested a rigorous cost-benefit analysis to define the specific financial regulatory costs to be incurred, and the benefits to be enjoyed, by the industry and investors. Such an analysis, they said, would be useful in determining the actual feasibility and necessity of the proposals in alleviating the issues they seek to address.
The IIAC has retained Deloitte LLP to conduct a Cost of Compliance Survey with respect to certain reforms. Upon completion, the survey results are to be separately submitted to the CSA.
Roundtables on CSA proposals to be held in December
IFIC speaks out on regulatory reforms