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April 2017
FAIR Focus
FAIR Canada's Monthly Review
Need for Advice in Consumers' Best Interests
 
This past month CBC Go Public has put a spotlight on the issue of how, all too often, Canadians are getting poor, conflict ridden advice that is not in their best interests.
 
Ensuring that consumers are protected in their dealings with firms and their financial "advisors" and financial "planners" is absolutely crucial, not just for consumers themselves but for the integrity of our capital markets. A statutory best interest duty is the cornerstone of such protection and must be next on the list of reforms for consumer protection in this country.
 
We urge all securities regulators to proceed expeditiously to implement a statutory best interest duty.

The Team at FAIR Canada 
CBC Go Public Investigation of Banks' Sales Practices
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"."
FAIR Canada Welcomes Steps to Improve Financial Planning and Financial Advisory Services in Ontario
Financial Planning and Financial Advisory Services
 
FAIR Canada supports reforms that will be coming according to the Ontario Ministry of Finance to close the regulatory gap that currently exists and regulate those who hold out as financial planners. "We fully agree", says Marian Passmore, Director of Policy and COO, "that anyone engaged with Ontario consumers in the provision of Financial Planning or Finance Advice should be required to achieve a certain level of proficiency, have their activities regulated by a regulator (including the titles used), and subject to a statutory best interest duty."
 
"It is of critical importance", says Marian Passmore, "that consumers have confidence that those who hold themselves out as financial planners and financial advisors will provide professional objective advice in the consumers' best interest including having processes and compensation structures that support this."
 
Statutory Best Interest Standard

FAIR Canada supports the Minister's statement that firms and their advisors need to work in the best interests of their clients and that this will be good for the long term best interests of the industry.
 
Read more here.
FAIR Canada Supportive of Expert Committee's Final Report on Regulating Financial Advisory and Financial Planning Services
FAIR Canada Supports Broad Level Recommendations

FAIR Canada supports the broad level recommendations of the Final Report of the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives. "We fully agree", says Marian Passmore, Director of Policy and COO, "that anyone engaged with Ontario consumers in the provision of Financial Planning or Finance Advice should be required to achieve a certain level of proficiency, have their activities regulated by a regulator (including the titles used), and subject to a statutory best interest duty." 

"It is of critical importance", says Marian Passmore, "that consumers have confidence that those who hold themselves out as financial planners and financial advisors will provide professional objective advice in the consumers' best interest including having processes and compensation structures that support this."

Read more here.
FAIR Canada supports FSRA 
FAIR Canada supports the creation of the new Financial Services Regulatory Authority of Ontario that will provide a more consumer-focused regulator with stronger regulator powers. FAIR Canada calls on the government to ensure that the new FSRA has consumer representation on its Board of Directors and has a statutory consumer advisory panel.
Enforcement - Giving SROs the Ability to Collect Disciplinary Fines Through the Courts  
FAIR Canada supports measures to improve the ability to collect fines. Allowing the SROs to directly file their decisions with the courts in the province of Ontario so that the decision may be enforced as an order of the court will assist efforts to collect fines that have been imposed as part of disciplinary proceedings. Improving efforts to collect fines will further the mandate of SROs to protect investors and have fair and efficient markets.

FAIR Canada calls on the Ontario government to go even further and make firms responsible for the fines imposed on their employees. "Requiring the firm to pay the fine if the registrant does not would encourage improved compliance at firms and be a strong deterrent", says Marian Passmore. "This would result in better protection for investors".
Investor Protection Clinic Approved
Canada's first Investor Protection Clinic has been approved by Osgoode Hall Law School. FAIR Canada, in conjunction with Professor Poonam Puri of Osgoode Hall Law School, was awarded start-up funding to establish Canada's first Investor Protection Clinic. The Clinic will provide pro-bono legal assistance to people in Ontario who have invested their savings and suffered an investment loss but cannot afford to hire a lawyer to help them. 
Media FAIR in the Media
Financial Post - Canadian regulators launch consultation on reducing regulatory burden for companies 
The Globe and Mail - Money Monitor: What your financial adviser's qualifications mean 
Toronto Metro - What to know when shopping for financial advice in a sea of titles and credentials 
The Brandon Sun - What to know when shopping for financial advice in a sea of titles and credentials
 The Insurance & Investment Journal - FAIR Canada calls on securities regulators to address banks' sales practices 
Investment Executive - FAIR Canada calls on regulators to take action on banks' sales practices 
Yahoo Finance - FAIR Canada Calls on CSA to Address Reports of Improper Sales Practices at Canada's Banks 
Nasdaq News - Scotiabank, Bank of Montreal defend sales practices amid probes 
Investment Executive - Call for standards 
680 News - Tool for financial service regulators to collect fines from advisers limited 
Winnipeg Free Press - Tool for financial service regulators to collect fines from advisers limited 
Financial Post - RBC, TD Bank investors to vote on giving bigger voice to smaller shareholders 
Osgoode Hall Law School - Investor Protection Clinic 
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