From the Regulators

Notice answers questions regarding new cost and performance reporting and account statement requirements

By James Langton |

Over the next several years, implementing the second phase of the Client Relationship Model (CRM 2) reforms will be a major exercise for many firms. Today, regulators issued a notice answering some of the common questions it has received about that process.

The Canadian Securities Administrators (CSA) issued a staff notice today outlining frequently asked questions (FAQs), and delivering additional guidance regarding the CRM 2 amendments, which introduce new cost disclosure and performance reporting requirements. The reforms are being introduced over the next couple of years, with the simplest changes adopted when the rule came into force on July 15, 2013; but firms have up to three years to adopt the more complex changes.

In the notice published today, the CSA sets out a list of the frequently asked questions that their staffs have received so far on the implementation process. The notice provides the regulators' responses to those common queries, and includes some additional guidance too.

The FAQ deals with issues such as: determining when a client relationship has ended; the application of client statements and annual report requirements to exempt market dealers (EMDs); how to report switch fees and short-term trading fees; disclosing referral fees; the timing of new cost and performance reporting requirements; the content of performance reports; and additional guidance on account statement requirements; among various other issues.

"We encourage registrants to plan now so that they can be ready to be in compliance with the new requirements," the notice says. The CSA adds that firms should consider things such as the need for systems changes and testing, updating policies and procedures, training staff, updating compliance oversight practices, and communicating with clients as they plan for the new requirements that take effect this year, and in both 2015 and 2016.

"Firms will also need to compile the information that will form the basis for the new reports on investment performance," it notes.