The British Columbia Securities Commission (BCSC) published its most recent Annual Compliance Report Card May 25, reflecting the commission’s enhanced focus in the past year on conflicts of interest (COI).
Among portfolio managers, investment fund managers and exempt market dealers in the province, the BCSC found several recurring deficiencies related to how these market participants assess, address and disclose COIs.
The findings include repeat failures in recognizing common material COIs, such as personal trading, outside business activities and the use of boilerplate disclosures that include conflicts which do not exist or which were not meaningful to clients. Firms also reportedly failed to have policies and procedures for specific conflicts such as gifting and referral arrangements.
“Of the top registrants reviewed, the top COI deficiencies were in the areas of referral arrangements, compensation practices and gifting,” they state. “The focus on conflicts of interest in 2022 was part of a national effort, coordinated by the Canadian Securities Administrators (CSA), of which the BCSC is a member. This focused review resulted in a significant increase in the identification of deficiencies.”
In 2022, the commission conducted 27 compliance reviews, finding 126 deficiencies. The average number of deficiencies per review has declined steadily in the past four years, from a peak of 8.93 deficiencies per review in 2019. The BCSC is the principal regulator for 159 advisor and dealer firms.
“Compliance teams participated in a sweep to review the implementation of the COI provisions included in the Client Focused Reforms (CFRs),” the report states. “The CSA is considering the next steps as a result of the sweep.”
