Regulatory changes to shake up advisor-client relations in Canada

Consultation paper could mark the introduction of a best interest standard and hold advisors accountable for decisions

Regulators in Canada are looking to shake up the advisor-client relationship in a move that could ultimately see advisors held responsible for investment decisions they make for clients and the introduction of a best interest standard.

A new consultation paper from the Canadian Securities Administrators (CSA) entitled “Proposals to Enhance the Obligations of Advisors, Dealers and Representatives Towards Their Clients” has been released outlining a series of “proposed targeted reforms”.

“With the publication of this consultation paper, the CSA expect to open a dialogue with all market participants on improving the relationship between clients and their advisers and dealers,” said Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers in a statement.

The consultation paper includes suggested reforms to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, along with guidance across a host of areas meant to better align the relationship between advisors and clients and enhance certain obligations. It also outlines a regulatory best interest standard that would offer a governing principle against which all other client obligations would be interpreted. It reports that all jurisdictions – meaning all provinces with the exception of British Columbia – have agreed to examine this standard further. It has received strong backing in Ontario and New Brunswick, while the likes of Alberta, Manitoba, Nova Scotia and Quebec have agreed to look at it further.

Now regulators are asking for feedback from the industry on the reforms before the recommendations are formalized. The recommendations cover such areas as know-your-product requirements, know-your-client requirements, conflicts of interest and more.

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