The debate on the Canadian Securities Agency’s proposed ban on embedded commissions took it latest turn last week when the Ontario Securities Commission
(OSC) released the list of panellists for its roundtable discussions on the subject.
Held in mid-September, the three roundtable line-ups will feature passionate advocates representing some of Canada’s top investment firms and industry bodies as each session explores a different alternative to the proposed prohibition.
“Regulators received a huge amount of responses and comment letters from people within the industry and I applaud them for taking this approach and arranging these roundtable discussions,” says Atul Tiwari
, Managing Director at Vanguard. “It’s been a deliberate review and it’s good there that will be further discussions. At the end of it all we hope the result is the right one, and that the ban gets implemented in a reasonably timely manner.”
The second roundtable, scheduled for 2:10 p.m. – 3:10 p.m. on September 18th, will be on the subject of “discontinuing, or implementing additional standards for the use of the deferred sales charge purchase option”. It will feature industry leaders on both sides of the debate, including Barry McInerney from Mackenzie Investments
(against the ban) and Marian Passmore from the Canadian Foundation for Advancement of Investor Rights (in favour of the ban).
Tiwari is a strong supporter of the ban and believes the discontinuation of embedded commissions would force advisors to transition to fee-based practices, which he believes to be more transparent. A survey conducted by Vanguard last year found that 76% of advisors believed changing to a fee based practice would be beneficial for their clients and 83% thought it would also benefit their own business.
Although Tiwari hopes regulators will ultimately implement the ban, he does hope they identify a strong ‘plan b’ if they decide not to proceed.
“We haven’t been through all of the submissions letters as yet, but from what we’ve seen I’m not sure that a suitable plan b has been put forward,” Tiwari says. “If this process does not result in a ban on commissions, hopefully there is something regulators will learn from these consultations. The review could help them discover something else that would meet the objectives around transparency and removing even perceived conflicts of interest as we go forward.”
Tiwari has been impressed with the volume of responses from within the industry and supports any new regulations that result in increased transparency.
“The great thing about the industry is that there is room for different opinions and models. When we look at the various submissions, we see that some people feel that the ban is negative for small investors, but we don’t believe that,” Tiwari says. “We believe that transparency and a movement to the use of lower cost products is in the best interests of investors.”
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