CSA to release consultation paper on obligations to clients

By Andrew Rickard | April 04 2016 01:35PM

The Canadian Securities Administrators (CSA) are preparing to publish another consultation paper on the obligations that advisors and dealers owe to their clients.

Last week, the CSA provided advance notice of Consultation Paper 33-404 – Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients, which they intend to publish later this month.

Seeking comments on proposed changes

The regulators say the paper will seek comments on proposed changes that are meant to strengthen the obligations that financial advisors and investment dealers have toward their clients. It builds on an earlier consultation paper published in 2012, Notice 33-403, which examined how a best interest standard of conduct might be applied to retail clients. This earlier notice considered, among other things, how an advisor can avoid having a conflict of interest when choosing a suitable investment for his or her clients:

"In the face of so many 'suitable' options, the adviser or dealer may be tempted to select a 'suitable' product that is not necessarily the best one for the client," read Notice 33-403. "This may result in investors acquiring a 'suitable' investment but at an inflated price. Even slightly higher fees can have a significant negative impact on the value of a client’s investment portfolio over the long term."

Improving relationships

The CSA says this new consultation paper will be the next step in its work in "improving the relationship between clients and registrants", and will not only consider the comments received during earlier consultations but also build on its other research work.

"Regulatory action is required to better align the interests of registrants to the interests of their clients, to improve outcomes for clients, and to clarify the nature of the client-registrant relationship for clients," reads the advance publication notice. "It is in this context that the CSA will be launching an important consultation on specific proposals to enhance the obligations of registrants towards their clients, and we invite stakeholders to be aware of this upcoming publication."

When Consultation Paper 33-404 is eventually published later this month, the CSA says the comment period will run for 120 days.