CSA chair speaks out on best-interest standard

CSA chair speaks out on best-interest standard

CSA chair speaks out on best-interest standard While most provincial regulators have decided not to pursue a best-interest standard, the head of the Canadian Securities Administrators said that doesn’t mean they’re not looking out for investors.

Louis Morriset, who heads the umbrella group for the provinces’ watchdogs as well as Quebec’s Autorité des marchés financiers, has told the Financial Post that regulators agree on tightening standards for advisors to achieve “better outcomes” for retail investors.

Where they differ, he said, is on the idea that a standard making the client’s best interest the highest priority for all investment decisions is the way to do it. On the other hand, he said, they all believe implementing targeted reforms that were proposed last year can effectively raise the bar for advisors.

The proposed reforms included measures to reduce conflicts of interest, control the use of titles, and reinforce an advisor’s knowledge of the clients and financial products he or she deals with.

The best-interest standard would “create confusion” and “legal and regulatory uncertainty,” Morriset told the Post.

One of the “very valid” concerns that he said were raised is the difficulty in measuring and assessing when the standard is reached, making it tough to ensure compliance. Creating a uniform standard that accounts for unique industry circumstances, such as dealers that sell only proprietary products, would also be challenging.

“You have to be very careful here in trying to craft a standard that will not be workable in the Canadian environment,” he said. “Or if it becomes workable, it will be workable because of many safe harbors that have to be added, or will have to be created, to make people understand the limits of such a standard.”

Morriset also rejected suggestions that the regulators who abandoned the best-interest standard were unduly influenced by Canada’s investment industry. Their decisions, he said, were informed by feedback they received from different stakeholders, including investor advocates.

One investor protection group, FAIR Canada, has said it was “disappointed” by low commitment among regulators to a best-interest standard, saying that the targeted reforms by themselves “will not properly address the problems associated with conflicts of interest and conflicted compensation structures.”

Advisors with retail clients have had to deal with tightening standards since the 2008 financial crisis. Australia and the UK have both adopted a best-interest standard. A fiduciary rule from the Department of Labor in the United States was supposed to go live last month, but was delayed by June due to a memorandum issued by US President Donald Trump.


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