Watchdogs walk away from best-interest proposal

The news has drawn differing reactions from industry stakeholders

Watchdogs walk away from best-interest proposal
The Canadian Securities Administrators (CSA) has announced in a new bulletin that four provincial securities regulators are abandoning talks regarding the proposed best-interest standard to protect investors.

The CSA bulletin said that rather than pursue the plan that’s been under negotiation for five years, watchdogs from BC, Alberta, Manitoba, and Quebec will look at target-reform proposals, according to CBC News.

Among the targeted reforms eyed are title regulation for those providing financial advice; rules governing conflicts of interest; and investment product suitability. For BC and Alberta’s regulators, a statutory best-interest standard could lead to clients becoming overly trustful of people dispensing financial advice.

With the four regulators dropping out, only the Ontario Securities Commission (OSC) and New Brunswick’s Financial and Consumer Services Commission (FCSC) are left to carry on. According to the CSA, they will hold “focused consultations” with stakeholders in the upcoming months.

The Investment Industry Association of Canada (IIAC) has voiced its support for the four dissenting regulators. “The IIAC commends and supports the four major securities jurisdictions … for recognizing that revised targeted reforms will advance the best interest of investors without the introduction of a vague and uncertain regulatory best interest standard,” the group said in a statement. “Canada’s investment industry has long held this position.”

Investor rights groups, meanwhile, are calling the news a setback. “We're very disappointed that the majority of securities regulators in Canada don't favour Canadians having professional financial advice that's in their interest,” Ermanno Pascutto, chairman of the board at the Foundation for Advancement of Investor Rights (FAIR Canada), told CBC News.

Pascutto said he wasn’t surprised that BC and Alberta are among those who walked away, saying that the two provinces are the least effective among all the jurisdictions at protecting investors.  He also noted Ontario’s key role as a leader in terms of investor protections, adding that it should continue to exist rather than being replaced by the federal government’s proposed national regulatory body — the Capital Markets Regulatory Authority — next year.

“If [the OSC is] replaced by the CMRA, all its good work will die,” he told the news outlet.

Kenmar Associates President Ken Kivenko, who runs the financial consumer advocacy site, was also dismayed.

“May 11, 2017, will go down in history as a day of infamy for Canadian securities regulators and puts to bed any idea that the CSA Secretariat (CSA) had any interest in actually protecting retail investors,” he said. “Their activities in the past raised serious doubts, but now the CSA have indeed made their position clear.”

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