Industry News

Investor advocacy group says the IIAC has not made a case for any further delay in adopting the new reporting requirements

By James Langton |

An investor advocacy group says it is opposed to any further delay in the implementation of new investor transparency requirements.

In a letter to the Canadian Securities Administrators (CSA), the Canadian Foundation for Advancement of Investor Rights (FAIR Canada), says that it objects to the regulators granting any further delay in the implementation of new investment cost and performance reporting requirements, as part of the second phase of the Client Relationship Model (CRM2) reforms.

The Investment Industry Regulatory Organization of Canada (IIROC) on Monday announced its final version of the CRM2 rules; although it noted that the regulators are still weighing a request to delay implementation of certain requirements.

See: CSA approves final IIROC CRM2 amendments

The Investment Industry Association of Canada (IIAC) is seeking a delay for certain measures that are due to take effect on July 15 of this year, and on the same date in 2016. The IIAC argues that firms should be given to the end of the year to implement new reporting requirements as this represents a more logical date for investors, and gives the industry a bit longer to ensure compliance.

See: IIAC steps up lobbying to delay CRM2

However, FAIR says that the IIAC has not made a case for any further delay in adopting the new reporting requirements. "We are of the view that the facts and arguments put forward by IIAC do not establish that there is insufficient time to successfully implement CRM2's requirements within the existing timeframe," it says in its letter to the CSA.

"It is not enough to show that some problems have arisen causing delays on some fronts. Absent clear demonstration that additional resources cannot be marshaled to still get the job completed on schedule, IIAC has not put forth any justification to warrant regulators taking the extraordinary step of delaying CRM2 implementation," FAIR argues.

The group maintains that "It is critical that this information get into the hands of investors without further delay …" And, it says that there is "a significant cost to investors if this information remains withheld from them and they are left in the dark."

FAIR notes that the industry has been aware of the implementation deadlines for a couple of years; at least since the CSA finalized their version of the rules in March 2013. And so, firms should have been planning for that from the start, it says. "Issues about the impracticality of a mid-year implementation should not be laid at the regulators' feet, nor are those issues grounds for delaying CRM2," it says. Moreover, it says that it believes that the bank-owned dealers, and and many other large firms, are ready to implement the new requirements now, or are confident they will be ready on time.

And, it says that the demands of CRM2 are not particularly complex. While the reporting does require some systems work, FAIR says, "it bears remembering that the project ultimately consists of simply delivering two reports - the cost report and the performance report - with the necessary information that they are required to contain." And, it says that brokerage firms surely have the technical capabilities to do this.

Nor does it buy the argument that firms and advisors need more time to get comfortable with the new requirements. "More time should not be granted for dawdling dealers to learn about CRM2 or for advisors to figure out what to tell clients," it insists.

"IIAC members and their advisors should be fully able to explain to clients right now exactly how the investments in their accounts have performed and exactly how much they paid for their advisor's services. There should be no need for additional time so that advisors can learn those things," it says.

Finally, FAIR says that granting an extension will likely be counterproductive, as it simply enables more tinkering, continued procrastination, and the emergence of competing projects. "Generally, what gets a stalled project completed is not additional time, but rather additional resources and determination," it says. "If there is a lack of enthusiasm for this project, as is likely the case with some IIAC members, then it can be expected that they will not devote the resources needed to get the job done until regulators insist."