CSA adds disclosure rules, compliance headaches for advisors

Regulators are ratcheting up disclosure requirements with the announcement of a three-year phase-in, but some advisors are already quitting one key segment of the market citing a mountain of paperwork.

CSA adds disclosure rules, compliance headaches for advisors

Regulators have increased disclosure requirements with a metered phase-in period to allow the industry to adjust. Advisors can expect more paperwork. And some are already deciding it's not worth the bother.

“I resigned from my mutual fund [business] primarily because of [compliance and regulations],” said Daniel Hanzelka of the Wealthgate Group. “I decided that instead of spending hours and hours of my time on compliance when I wanted to be helping people, I would step away from that side of my business and sell my book of business.”

Advisors can expect more paperwork next year and the year after that. The Canadian Securities Administrators (CSA) on Tuesday announced new regulations designed to improve disclosure for investors, with a three-year phase-in period to allow industry time to meet the requirements.

Although the goal is investor protection, something most advisors support, for some the regulatory burden is becoming unbearable.

Being in the business for 17 years, Hanzelka agrees that there was a need for disclosure regulations and that he agrees with many of the changes he has seen. “Sixteen years ago there was no compliance, but now we’re seeing the pendulum has swung to the other side… it’s getting harder and harder for advisors to work with all of the compliance that has to happen.”

Bill Rice, Chair of the CSA and chair and chief Executive officer of the Alberta Securities Commission, said the new regulations are intended to benefit consumers.

“Research shows that investors across Canada lack vital information about the cost and performance of their investments,” said Rice. “These amendments demonstrate the CSA’s commitment to arm investors with sufficient account information to make informed decisions about their investments.”

CSA said the amendments are designed to ensure that all investors receive the same information about the cost and performance of their investments, and that the same standard to disclose this information is applied to all firms registered to deal in securities or act as portfolio managers.

From 15 July, 2014, pre-trade disclosure of charges and disclosure of compensation from debt securities transactions in trade confirmations. In the following year, from July 15, 2015, the CSA will require enhanced client statements that will provide position cost information and market value calculated in accordance with a specified methodology. From July 15, 2016, regulators will require that investors receive an annual report on charges and other compensation and an annual investment performance report.

The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinate and harmonize regulation for the Canadian capital markets.