Following the footsteps of regulators worldwide, Canadian regulators in a variety of sectors are shifting their focus from monitoring the solvency of financial institutions to consumer protection, according to Mary Condon, vice chair of the Ontario Securities Commission.
Speaking Wednesday on a regulatory panel at the Advocis symposium in Toronto, Condon said “Given the complexity and blurring of products in the securities, insurance and banking sectors…financial regulators are now required to evaluate perimeter of the market and change established approaches if they don’t protect investors.”
Locally, the OSC will be keeping its eye on new products that have entered the market and whether or not the disclosure provided to investors is adequate. For example, exchange traded funds, which were introduced in the early millennium as pools of securities that passively followed indices, have since evolved into more complex products, which now have active managers.
“We want to make sure we have the capacity to stay current with new market developments,” said Condon.
Other areas of concerns for the OSC are emerging market issuers going public in Canada. The OSC is currently examining modifications to disclosure surrounding these listings to ensure investors are well informed.
“Comprehensible disclosure isn’t always comprehensive disclosure,” she added.
The OSC also has its watch on the proposal by Toronto-based Maple Group Acquisition Corp. to acquire Toronto-based TMX Group Inc., which owns and operates the Toronto Stock Exchange and TSX Venture Exhange.
On the insurance front, the Insurance Council of British Columbia has added new supervision requirements for new agents, said Gerry Matier, executive director of the ICBC, who also spoke on the panel.
For the first two years of their career, new life licensed insurance agents will need to work under the direct supervision of a more senior broker, with five or more years of experience.
“New agents are to be guided and trained to be good agents to their clients by a more senior agent,” said Matier. “They will need to be shown proper documentation and file maintenance for their client cases.”
The new supervision requirements are also flexible, where the more competent an agent becomes over the two years, the less supervision will be required.
The ICBC is also calling for more regulation in the areas of managing general agencies, in addition to the Canadian Council of Insurance Regulators review of MGA entities.
“We see this review as an opportunity from a regulatory perspective to have more oversight,” said Matier.
Currently, MGAs are not formally required to screen their agents. The ICBC is calling for more responsibility in this respect, where MGAs must review the changing business practices of the agents they conduct business with on an ongoing basis.
If questionable business practices come to light, the ICBC would like to see MGAs required to not only report these practices to the insurers they do business with, but also to regulators.
“We want to make it easier for MGAs to report bad agents directly to the regulators,” he added. “This will add to client protection.”
In light of the financial crisis of 2008, Phil Howell, CEO and Superintendent of Financial Services for the Financial Services Commission of Ontario, spoke about the importance of professionalism in the advisory field and making client interests the priority.
“When client interests are put first, advisors enhance their image and credibility,” said Howell, “Financial advisors need to trail blazers in the area of the fairness and marketing products in a way that is informative and neutral for clients…after all, that is their value proposition to clients.”