Conflicted compensation, title abuse, and the proposed best-interest standard were emphasised
The Investor Advisory Panel to the Ontario Securities Commission recently released its 2016 annual report, where it called for several measures to better protect Canadian investors.
The group asserted that disclosures via CRM and point-of-sale disclosure are not enough to protect investors. Instead, conflicted compensation should be banned altogether. “Our view on conflicts of interest and conflicted compensation has never wavered – there is simply no place for them in a healthy securities regulatory landscape.”
The group also repeated their previous calls for a best-interest standard, which they said would be preferable to a benchmark for suitability. “Financial services providers and authorised agents should have as an objective, to work in the best interest of their customers and be responsible for upholding financial consumer protection,” they said, reiterating from their previous response to the CSA Consultation Paper 33-404 on enhancing industry obligations toward clients.
Aside from addressing the issues regarding conflicted compensations and inducements, a best-interest standard would tackle possible concerns regarding titles. “[I]n the context of a best-interest standard, there would be no benefit to using a title created to mislead investors about what advice an advisor is authorized to or can provide.”
A recent report from the Small Investors Protection Association (SIPA) suggests that the title “advisor,” which is only slightly different from the regulated term “adviser,” is being used to deceive investors. Many “advisors,” SIPA claims, are not qualified and not legally obligated to provide their clients with the best advice, but are just employed to sell financial products regardless of suitability.
The panel also asked for industry-wide improvements to client risk profiling practices, along with the chance to engage with the new Capital Markets Regulatory Authority, a central regulator that’s being set up to oversee activity across Canada.
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The group asserted that disclosures via CRM and point-of-sale disclosure are not enough to protect investors. Instead, conflicted compensation should be banned altogether. “Our view on conflicts of interest and conflicted compensation has never wavered – there is simply no place for them in a healthy securities regulatory landscape.”
The group also repeated their previous calls for a best-interest standard, which they said would be preferable to a benchmark for suitability. “Financial services providers and authorised agents should have as an objective, to work in the best interest of their customers and be responsible for upholding financial consumer protection,” they said, reiterating from their previous response to the CSA Consultation Paper 33-404 on enhancing industry obligations toward clients.
Aside from addressing the issues regarding conflicted compensations and inducements, a best-interest standard would tackle possible concerns regarding titles. “[I]n the context of a best-interest standard, there would be no benefit to using a title created to mislead investors about what advice an advisor is authorized to or can provide.”
A recent report from the Small Investors Protection Association (SIPA) suggests that the title “advisor,” which is only slightly different from the regulated term “adviser,” is being used to deceive investors. Many “advisors,” SIPA claims, are not qualified and not legally obligated to provide their clients with the best advice, but are just employed to sell financial products regardless of suitability.
The panel also asked for industry-wide improvements to client risk profiling practices, along with the chance to engage with the new Capital Markets Regulatory Authority, a central regulator that’s being set up to oversee activity across Canada.
For a broader look at Wealth Professional's latest industry news, click here.
Related stories:
Are happy shareholders turning a blind eye to bank misconduct?
Are most financial advisors just salespeople?
