No need for statutory fiduciary duty, says law firm
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.)
“The terms ‘fiduciary’ and ‘best interest’ are over-used, casually and interchangeably, to describe a wide range of possible and unclear obligations,” noted Laura Paglia, a Torys Partner and author of the report. “When we looked at the content of the obligations of investment advisors in the U.S., the U.K. and Australia, we found that none of these jurisdictions have, or are considering, more onerous requirements than those already in place in Canada.”
The report recommends that the CSA look to those jurisdictions when coming to its own findings, while taking into consideration “the underlying substance and context informing the concepts that are being considered.”
The CSA has yet to respond to the question at hand or respond to the report's findings.