Financial Advisors Association of Canada raises concerns, warns of reduced competition under title protection framework
After Ontario’s financial regulator officially announced its final Fee Rule in September – which includes separate calculations of fees for self-regulatory credentialing bodies and other CBs – another industry group and recognized credential-granting body has made its thoughts known.
In a statement, the Financial Advisors Association of Canada (Advocis) expressed its concerns with the Financial Services Regulatory Authority of Ontario’s (FSRA) Fee Rule, saying it’s “unfair to existing credentialing bodies” and “should be revised.”
“Advocis is disappointed by the Ontario Ministry of Finance's approval of FSRA's Fee Rule on September 13th,” it said.
“The Fee Rule diverges from the principle of fairness entrenched in FSRA’s policy position and undermines the very consumer protections that the Title Protection Framework aims to uphold.”
Non-CIRO CBs to bear critical costs
The rule, according to the statement, introduces exemptions that diverge from the actual cost dynamics entailed by the province’s title protection framework.
The variable components of the fees, it pointed out, are meant to go toward functional expenses beyond FSRA’s supervisory activities, including IT costs, operational expenses, and consumer education initiatives. With the exemptions stipulated in the newly approved Fee Rule, Advocis said CBs will bear those critical costs, and CIRO and its licensees will get to enjoy the benefits without sharing the burden.
“The New Fee Rule will reduce competition by discouraging non-CIRO credentialing bodies from entering, operating, and remaining in the market,” warned interim CEO Harris Jones, who was announced last month following the departure of long-time leader Greg Pollock. “The Ontario consumer will bear the costs associated with the lack of competition, and credentialling bodies must now face a concerning precedent for exemptions.”
The statement from Advocis follows a similar response from FP Canada, which noted in part:
“[V]irtually all stakeholders had concerns with the revised Fee Rule. Many stakeholders recommended consumer-focused alternatives and suggested a better way to bring CIRO into Ontario’s Title Protection Framework.
“We continue to be concerned with a Fee Rule that includes an arbitrary annual fixed fee for CIRO. Other than to state in general terms that the objective of the revised Fee Rule is to avoid duplication of regulatory oversight, FSRA has not been able to provide any rationale for the quantum of the $25,000 fixed fee.”
FSRA stands firm on fee rule
For its part, FSRA has maintained that the final Fee Rule was drafted with fairness in mind.
“FSRA determined that the $25,000 fixed annual credentialing body fee is appropriate to ensure that all credentialing bodies pay a reasonable minimum contribution to the operational costs associated with overseeing the sector,” FSRA spokesperson Russ Courtney said in a statement emailed to Wealth Professional.
Reiterating the provincial regulator’s previous position, Courtney noted that CIRO is already overseen by the Ontario Securities Commission (OSC) and the Canadian Securities Administrators (CSA).
“Specifically, these regulators have robust oversight of its governance, administration, operations and other regulatory responsibilities,” he said. “Thus, FSRA believes having CIRO pay for this oversight by another regulator (us) is not warranted.”
The jury’s still out on whether FSRA will recognize CIRO as a CB for financial advisors in Ontario. Should that come to pass, Courtney indicated the Fee Rule will maintain fairness as “start-up cost allocations will be adjusted to all.
“This will also result in an overall reduction of fees for all existing credentialing bodies,” Courtney added.
