A project led by securities regulators to explore the concept of sharable KYC data found that, while this could improve the investor experience, there’s little consensus on how it should work and greater policy clarity is likely needed.
In a report issued Tuesday by members of the Canadian Securities Administrators (CSA) that participated in the regulators’ data portability project — which examined the idea of enabling investors to more easily share their financial data among firms — the regulators said that enhanced data portability could benefit investors by making it easier for them to switch firms or to open accounts with multiple firms.
“Such portability would reduce friction and improve investor choice,” the regulators said.
At the same time, the project — which included a consultation paper, a pair of industry roundtables and one-on-one meetings between industry firms and regulators — also found that there is not yet an industry consensus on the model for enhanced portability that would work best.
The project’s participants also raised concerns about “regulatory uncertainty, privacy and consent management mechanisms, data security and the need for data standardization,” it noted.
As a result, the regulators have decided not to go ahead with a real-world data portability test because most participants in the project want to see how the federal government’s open banking initiative plays out first.
“That federal framework would likely set foundational data-sharing standards relevant to investment firms and their customers,” the regulators noted.
Additionally, the report indicated that some participants also suggested that the CSA needs to clarify how KYC obligations would apply in a world of more portable investor data.
“Some stakeholders noted that uncertainty around delegation and meaningful interaction may be a barrier to data portability implementation,” the report said.
“As investor demand for data portability develops in Canada, this project has established a solid foundation of knowledge and stakeholder networks that will help regulators and firms navigate the new terrain,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC) in a release.
“We’ll continue to proactively explore emerging technologies and business models, and the complex regulatory questions they pose, through structured stakeholder engagement,” he added.
The project was the first initiative of the CSA’s Collaboratory, which examines the potential of new technologies and business models.