OSC and CIRO dig into how scorecards, incentives, and sales pressure may shape fund recommendations
One in four mutual fund dealing representatives at Canada’s largest banks say clients have been recommended products or services that are not in their interests at least “sometimes.”
This is according to a new report from the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO).
The findings are based on a survey of 2,863 representatives across five bank-affiliated mutual fund dealers—BMO, CIBC, RBC, Scotiabank, and TD—working in Ontario branches.
The survey explored four key areas: the sales environment, sales pressure, the range of products, and representatives’ product knowledge.
According to OSC and CIRO, 40 percent of representatives said performance scorecards—used to track sales and client contact activity—directly influence product and service recommendations.
One in three said clients were provided with incorrect information about recommended products.
The regulators stated that the use of scorecards, compensation structures, and incentive systems may be contributing factors to these outcomes.
“While it’s clear many bank representatives are prioritizing quality advice, it is also clear that sales pressures and incentivization may be driving concerning behaviours,” said Grant Vingoe, CEO of the OSC.
He added that representatives should focus on the best interests of their clients rather than feel heightened pressure to meet sales targets, and said the regulator will continue working to address these issues.
The survey, conducted following a public report in November 2024 that raised concerns about high-pressure sales tactics at bank branches, forms part of a broader initiative by OSC and CIRO to examine the culture within bank-owned mutual fund dealers.
The sample was found to be statistically representative of the broader population of registered mutual fund dealing reps in Ontario.
“Our mission is to promote healthy capital markets by regulating fairly and effectively so that investors are protected and confident investing in their futures,” said Andrew Kriegler, president and CEO of CIRO.
He noted that while the survey results highlighted areas needing improvement, the banks’ cooperation reflects a shared commitment to doing what’s right for investors and fostering transparency.
The report noted that while most representatives were satisfied with the range of mutual funds available, some indicated that access to external funds could provide clients with more options.
The OSC and CIRO also found that 23 percent of respondents could not define Management Expense Ratio (MER), though only 12 percent answered incorrectly when asked about its impact on fund performance.
Regulators said this points to a need for dealers to re-evaluate training standards to ensure clients receive accurate product information.
The survey also highlighted the widespread use of scorecards among the five banks. These tools, updated regularly, track both sales targets and client engagement.
Responses suggested these tools may increase sales pressure, influence recommendations, and ultimately risk misalignment with clients' interests.
OSC and CIRO urged all five dealers to assess the role of compensation, incentives, and sales pressure within their sales environments.
As a next step, OSC and CIRO will gather information directly from each of the five dealers to understand their existing sales practices and the controls they have in place to address conflicts of interest tied to compensation and incentive structures.
The upcoming phase will include meetings with key personnel, data requests, and further review of scorecard use and other performance tools.
Regulators said they will consider further regulatory action once their review is complete.
