CSA sits on the fence about new regulations, deciding to continue its consultations instead.
Opposed to any regulation that would ban trailer fees or impose fiduciary duty on financial advisors, Advocis is happy to hear the CSA will discuss both issues further before acting.
“This cautious and reasoned approach is the right course because there’s so much at stake," said Advocis President and CEO Greg Pollock in a release. "A wrong decision could have devastating consequences, so we’re relieved that the regulators are taking the time to consider all the facts.”
The CSA released, Tuesday, two status reports identifying that it would continue consultations on mutual fund commissions and statutory fiduciary duty. There is ongoing industry debate over both issues, determined the CSA. Whether current regulatory framework adequately protects investors and what impact new regulation would have on investors and capital markets need to be considered, says the CSA.
In regards to mutual funds, the CSA says those opposed to banning embedded fees argue that there is no justification for such a change and that negative consequences include less access to advice, the elimination of investor choice and a disproportioned playing field for competitive products. Investors, on the flip side, according to the CSA, say embedded compensation should be banned and that advisors should be held more accountable by regulators in areas such as proficiency requirements and use of titles.
“Given the varying needs of investors, choice should be maintained," said Pollock. "...choice in the kind of compensation and the kind of client-advisor relationship that both parties are comfortable with.”
Advocis, which has more than 11,000 members across Canada, believes eliminating embedded fees would drive up the cost of financial advice so much that hundreds of thousands of middle-class Canadians would be left unserviced.
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