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June 2019
FAIR Focus

FAIR Canada comments to CSA/IIROC on Internalization in the Canadian Equity Markets (the "Paper")
We commend the CSA and IIROC for examining the issue of internalization of order flow and its impact on retail investors in particular. As the Paper notes, internalization has long been an issue in equity markets because of its implications for market quality and efficiency, and for fair treatment of investors.

A trade that has been "internalized" is generally considered to be a trade that is executed with the same dealer as both the buyer and the seller. A dealer may act as an agent on both sides of an internalized trade, or may act as principal in taking the other side of a client order. Several types of conflicts arise, but the most significant conflicts are created when dealers trading for their own inventory accounts fill their client orders as principal. The rules and regulators' surveillance and compliance programs should continue to aim to ensure that conflicts of interest do not affect the quality of execution of clients' orders when a dealer is acting as principal. The CSA and IIROC should continue to periodically monitor data on the amount of internalization of orders in equity markets, and publish highlights of such monitoring.

To read our full submission click here.
FCAC Draft Banking Code for Seniors
The Financial Consumer Agency of Canada (FCAC) is working on a draft code of conduct for delivery of banking products and services to seniors. FAIR Canada has submitted a comment letter outlining its concerns including that oversight and enforcement of the code should be under the control of the FCAC rather than the Canadian Bankers Association, which is a lobby group. 

There are also concerns about the structure of the oversight committee and the ability to ensure compliance and enforcement of the code once it is in place. FAIR Canada also recommended that the standalone report of all the banks should also be available on the FCAC website as well as the website of each individual bank. 

To read our full submission click here
OSC Investor Advisory Panel Report 
The OSC Investor Advisory Panel 2018 annual report published in May articulates the key investor protection issues facing Canadians. The report notes the lack of progress towards addressing the best interest standard, embedded commissions and other important matters. The panel is chaired by former FAIR Canada Executive Director, Neil Gross. 

Few will recall that the IAP was created in response to one of FAIR Canada's first submissions--- to the Ontario legislative committee overseeing the OSC back in 2009!  The committee adopted the recommendations of FAIR Canada and the IAP recommendation was the only one implemented by the Government and the OSC.

To read the IAP Annual Report click here
Proposed Framework for Crypto-Asset Trading Platforms 
FAIR Canada supports the proposed CSA/IIROC framework for the regulation of crypto-asset trading platforms as described in CP 21-402. The proposed framework is based on the existing regulatory framework applicable to marketplaces and incorporates relevant requirements for dealers facilitating trading or dealing in securities. FAIR Canada is supportive of the proposed framework to the extent that it thoroughly identifies risks and provides a robust framework of requirements that addresses the need for strict risk controls on markets in order to protect the the interests of investors in crypto assets.

To read our full submission  click here.
Should Canadians STANDUP to the Financial Services Industry?
Rob Carrick of the Globe & Mail interviewed John De Goey on his new book STANDUP to the Financial Services Industry: A Practical Guide for Canadians in an article entitled "Solving the problem of well-intentioned investment advisors who give bad advice".

This book looks at how small investors can learn about the financial services industry in order to better arm themselves with knowledge of how the industry works and how investors can make sure to consider their own interests because advisors do not have an obligation to do so. The book aims to help investors make better investment decisions and states that investors should demand accountability from the financial services industry. Investors invariably think that financial advisors have an obligation to protect customers as the relationship is one of trust and dependence on the part of the customer. However, the traditional financial services industry is not obliged to act in the best interests of clients.

John De Goey is a Portfolio Manager and brings his knowledge from being involved in the industry to help inform those who need help. As noted by Larry Bates, author of Beat the Bank: "[m]any financial advisors provide Canadians with good advice while many others give bad advice. The big problem is most Canadian investors can't tell the difference. John De Goey's new book provides investors with the insight and motivation to STANDUP for themselves, ask the right questions and get the quality advice they deserve." De Goey provides 50 questions in the book that people should ask their advisors ranging from general questions to more specific.

Standing up to the traditional financial advisors may be an option for some investors. Others may just prefer to open an account with a robo-advisor and invest in low cost ETFs and avoid the hassle of trying to get good advice from someone whose financial interest depends on recommending less than optimal products.
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