Four provincial regulators reject best interest standard

By Susan Yellin | May 12 2017 01:30PM

Four provinces have indicated to the Canadian Securities Administrators (CSA) that they will not be working toward a proposed regulatory best interest standard.

In a notice released Thursday, the CSA said Ontario and New Brunswick remain committed to a regulatory best standard, as they always have, while securities commissions in British Columbia, Quebec, Alberta and Manitoba have “expressed strong concerns about the benefits” of introducing the standard over and above targeted reforms regulators are also discussing.

BC, Quebec, Alberta and Manitoba

In a consultation paper released a year ago, BC, Quebec, Alberta and Manitoba expressed strong reservations about introducing a best interest standard. But now, the CSA says regulators in those four provinces will not be doing any more work on the proposal.

“In their view, in the current regulatory and business environment, implementing the targeted reforms to deal with specific harms identified will meaningfully and practically lead to better investor outcomes and advance the best interest of all investors,” the CSA says in its notice.

Vague and uncertain

The Investment Industry Association of Canada (IIAC) said it supports the stance taken by Alberta, Quebec, BC and Manitoba to not introduce a “vague and uncertain” regulatory best interest standard.

“The IIAC calls on the [four provincial securities commissions] to encourage Canada’s other provincial regulators to adopt a similar stance to achieve a harmonized regulatory framework across Canada, which would be in the interests of investors and our capital markets,” Ian Russell, IIAC president and CEO said in a statement.

In its notice, the CSA said the Nova Scotia and Saskatchewan securities commissions may be open to further discussions considering a best interest standard as long as major revisions are added.

Targeted reforms

The CSA said it stands firm on developing the targeted reforms that deal with issues such as conflicts of interest, suitability, know your client, know your product, relationship disclosure and titles and designations.

“We are unanimous on implementing change and raising the bar in order to significantly strengthen the standard of conduct and make the client-registrant relationship more centered on the interests of the client.”

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