The compromise reached by regulators for implementing the remaining Client Relationship Model (CRM2) reforms is provoking mixed reactions from the securities industry and investor advocates.
The industry, represented by the Investment Industry Association of Canada (IIAC), had lobbied for delays in the implementation of new requirements under the CRM2 reforms that were slated for July 2015 and 2016 to the end of their respective years. These delays were generally opposed by investor advocates.
The Canadian Securities Administrators (CSA) Wednesday delivered a split decision. While the CSA decided to delay the implementation of certain reforms that were slated to take effect in July of this year until the end of the year; it is also sticking with the July 2016 implementation deadline for the new reports focusing on investment costs and performance.
"The changes announced by the CSA provide more time in 2015, which is much appreciated, but the overall time allowed remains the same," says IIAC managing director, Barbara Amsden, in a statement responding to the CSA's decision.
She notes that this means that firms that want to provide reporting that's connected to the calendar year will have to start their reporting periods on Jan. 1, 2016. "Firms that can't safely speed up implementation will be forced to mid‐year 2016 to mid‐year 2017 annual reports, at least to start," she notes.
This is just fine with the Canadian Foundation for Advancement of Investor Rights (FAIR Canada), which opposed the proposed delays. "On the key issue raised by IIAC's request, we're pleased the CSA has decided that investors will not have to wait longer to get the new reports on investment performance and dealer/advisor compensation that CRM2 requires," says FAIR's executive director, Neil Gross.
He also indicates that FAIR is pleased that the CSA sided with investor advocates in leaving its definition of "book cost" unchanged under CRM2; noting that the CSA's decision resolves the "question of providing position cost data for tax purposes in a practical and sensible way that will not cause delay."
The IIAC's Amsden maintains that, "We think investors would prefer to receive book cost information that can be used for both securities regulatory and tax purposes. We will work with tax and securities authorities, and with accounting professionals, to address investors' needs."
The one area where the industry scored a victory is in the CSA's decision to put off implementation of this year's CRM2 requirements until the end of the year. Amsden notes that this "helps address the delay in finalizing the regulations for 2015", which were only approved last week.
FAIR says that it would have preferred that the CSA maintain the original implementation deadline for those requirements, but acknowledges that, "it appears the CSA felt there was a need for compromise."
The Investment Industry Regulatory Organization of Canada (IIROC) says it supports the CSA's compromise. "We believe this decision has struck an appropriate balance in moving this important investor protection initiative forward and acknowledging some of the implementation challenges faced by the industry," IIROC said in a statement.
"We will continue to work with all stakeholders to effectively implement these reforms that improve disclosure and transparency, and provide important information to investors," IIROC said.