Investor advocacy group applauds taskforce’s work, identifies some areas of concern for governments and regulators
Following the publication of the Ontario Capital Markets Modernization Taskforce (CMMT) final report, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) has voiced its support.
“There are a number of recommendations that will appreciably benefit investors in Canada,” FAIR Canada Executive Director Jean-Paul Bureaud said in a statement. “We applaud the work of the Taskforce, which has focused a light on a number of critical investor rights and protection issues.”
The organization said many of the recommendations should be considered by governments and regulators outside Ontario. It supported establishing a binding-decision mandate for the Ombudsman for Banking Services and Investments (OBSI), noting the beneficial impact it would have in promoting investor confidence and bringing Canada’s complaint-handling standards in step with other countries.
It also approved of proposals for enhanced governance and oversight of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), and welcomed the taskforce’s recognition of the ongoing consultation on merging the two SROs that’s being led by the Canadian Securities Administrators (CSA).
“The Taskforce’s recommendations about the product shelf are also very encouraging,” the group added, referring to proposals that would help ensure dealers don’t bias recommendations toward proprietary investment products. “We believe that investors are better served by having access to a broader range of suitable products, as well as by an enhanced focus on conflicts when dealing with proprietary-only sale channels.”
Highlighting some areas of concern, FAIR Canada said that the proposed use of disgorgement power the Ontario Securities Commission (OSC) to collect money to be distributed to harmed investors doesn’t go far enough, arguing that the OSC should be able to order compensation for investor losses even if no ill-gotten gains are alleged or proven.
“At the end of the day, what matters most to a harmed investor is whether he or she will be financially compensated for their loss -- everything else is just talk,” the group said. “The fact that a market participant may not have personally profited from the investor’s loss is of little comfort to the investor.”
The “access equals delivery” model of disclosure, the group said, should be expanded to accommodate investors who cannot or would prefer not to use digital-only means of communications. Issuers, it added, should be required to issue a press release in most situations and give investors the option to get notifications when disclosure-related documents are posted on their websites.
The group also urged clarification on several questions, including what “designated funds” that the CMMT proposed for the OSC should be used for and how the OSC’s mandate will be expanded to include “fostering capital formation and competition,” which FAIR Canada said should not be pursued for its own sake, but done in the interests of consumers.
“The Taskforce recommends implementing an Ontario version of the draft Capital Markets Act (CMA) by the end of 2021,” the group added. “Given the importance of this draft legislation, we believe that the Ontario version of CMA should be published for public input before it is implemented.”