The organizations considered conflicts of interest practices at 172 firms
The Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) have been reviewing the conflicts of interest practices in various parts of Canada’s investment industry.
With 172 firms included in the review, the two organizations have drawn several important conclusions about how these practices are – or are not – working to update its guidance for registered entities.
It’s been three years since the CSA published the Client Focused Reforms, aiming to ensure that clients’ interests always come first.
“The implementation of the Client Focused Reforms was an important step in the protection of retail investors across Canada,” said Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission. “Under these requirements, registrants are expected to abide by a high standard of conduct and address material conflicts of interest in the best interests of the client.”
Firms getting it wrong
The staff notice ‘Client Focused Reforms: Review of Registrants’ Conflicts of Interest Practices and Additional Guidance’ summarizes the findings of the review and advises on how securities advisers, dealers, and representatives (registrants) can ensure compliance.
Failings uncovered by the review include:
- failure to identify one or more material conflicts of interest
- inadequate controls to address certain material conflicts of interest
- inadequate or outdated written policies and procedures relating to conflicts of interest.
“The CSA and CIRO are committed to ensuring compliance with the Client Focused Reforms for the benefit of Canadians,” said Andrew Kriegler, president, and CEO, CIRO. “We encourage all firms to carefully review this notice to identify opportunities for strengthening their compliance programs to ensure they meet the enhanced standards established by the Client Focused Reforms.”
Further review
The organizations will be conducting further reviews later in 2023 with a particular focus on compliance with know-your-client, know-your-product and suitability determination requirements that came into force on December 31, 2021.
“We’ll have a better understanding of the level of compliance once our reviews are complete,” added Mr. Magidson. “If we observe that the high standards of conduct required by the Client Focused Reforms are not achieved, we will consider our course of action at that time, such as considering additional rules.”
