Association says neither investors nor Canadian markets will benefit from recommendations
Money managers should be exempt from the Canadian Securities Administrators’ latest set of industry proposals, according to the Portfolio Management Association of Canada.
Following on from the CSA’s client-focused reforms, which were unveiled in June and are out for comment until October 19, the regulator this month announced its second wave of efforts to reinforce investor protection.
It recommended a ban on deferred sales charges (DSC) for mutual funds and on the payment of trailer fees to discount brokerages. The comment period runs for 90 days and will end on December 13.
The PMAC, however, said that from a portfolio manager’s point of view there is no justification for the separate conduct regimes – NI 93-101 and NI 93-102 - in addition to the client-focused reforms, NI 31-103, and that it is simply not a cost-effect solution.
A PMAC statement said: “The rigorous proficiency standards, fiduciary duty of care owed by advisors to their investors, minimum insurance and capital requirements, and the robust, principles-based regime advisers must adhere to under NI 31-103 – coupled with a lack of any policy rationale justifying the need for separate registration and business conduct regimes for advisers - warrants an exemption for portfolio managers.
“PMAC has concerns that a Canadian derivatives regime that goes beyond IOSCO’s standards and that captures advisors in a way that the US Commodity Futures Trading Commission does not, may have a negative impact on the Canadian derivatives market, as well as on Canadian investors.
“PMAC respectfully disagrees with the CSA’s cost-benefit analysis with respect to implementing the derivatives regime for advisors. We note that NI 93-102 and NI 93-101 would require material additional compliance resources and costs and the repapering of existing instruments, client documentation and policies and procedures, all without a demonstrated investor or market harm being addressed.”
While the PMAC hailed the CSA’s “laudable aims” and for developing a harmonized derivatives registration and business conduct regime across Canada, it believes its latest proposals are focused mainly on dealing activities and “do not identify specific investor or market protection issues with respect to the activities of advisors, particularly portfolio managers, vis-à-vis derivatives”.
The PMAC added: “We respectfully disagree with the CSA’s response to the 2017 Proposal that the proposed business conduct regime for derivatives advisers does not unnecessarily duplicate certain requirements under NI 31-103 for portfolio managers. We do not believe that investors or the Canadian capital markets will benefit from the CSA imposing duplicative and additional market conduct requirements on advisors in the derivatives context.”