FAIR Canada has written an open letter to the Canadian Securities Administrators (“CSA”), the organization for provincial securities regulators, calling on them to act on a timely basis to address the sales practices at federally regulated financial institutions. While many of the bank employee revelations and consumer complaints relate to banking products (over which the Financial Consumer Agency of Canada has jurisdiction), some relate to mutual funds and other investment products which fall within the regulatory responsibility of provincial securities commissions.
Compliance with Securities Requirements
“FAIR Canada calls on securities commissions to advise Canadians the specific steps that they are taking to discharge their compliance oversight and enforcement responsibilities to ensure that current regulatory requirements are being met and investors are being protected” says Ermanno Pascutto, Chair of FAIR Canada.
Conflicted Compensation Structures
FAIR Canada also calls on provincial securities regulators to take timely action to address the issue of conflicted compensation structures. “Securities regulators need to make it clear what practices and incentives are permissible and those that are not, in accordance with the mandate to protect investors and ensure fair and efficient markets” says Marian Passmore, Director of Policy and COO of FAIR Canada. “It should not be left up to the firms to determine whether they will be able to continue to use the sales practices and incentives.”
Statutory Best Interest Standard and Titles
FAIR Canada fully supports reforms that will require individual registrants (aka “financial advisors”) and their firms to have a statutory duty to act in their client’s best interests. FAIR Canada calls on the regulators to move forward quickly with implementing a best interest standard which prohibits conflicted remuneration and requires the avoidance of conflicts of interest. “Titles should be regulated so it is clear to consumers whether they are getting advice in their best interest or not”, says Ermanno Pascutto. “Those who do not provide advice in the consumer’s best interest should be called a “salesperson” and not be held out as a “financial advisor”.”