Maureen Jensen, chairwoman and CEO of the Ontario Securities Commission (OSC), sketched out a positive vision for the financial advice industry that features new investor-friendly reforms, a reduction in needless regulation and continued asset growth for advisors as the keynote speaker at an industry conference in Toronto on Thursday.
In a wide-ranging discussion with Jack Mintz, president’s fellow at the University of Calgary’s School of Public Policy — one of three think tanks hosting the conference along with the C.D. Howe Institute and CIRANO as well as the Toronto Financial Services Alliance — Jensen defended the need for further regulatory reforms to the advice business in Canada.
These include the so-called “targeted reforms” the Canadian Securities Administrators (CSA) proposed last year along with a “best interest standard” that the OSC favours and possible changes to the embedded commission structure for the investment funds industry, which the CSA is also considering.
There’s no question these reforms would mean big changes for the investment industry, but they would ultimately be good for the industry as well, Jensen suggested. Specifically, she noted that similar reforms in Australia were initially met with concern from the industry, but advisors have seen their assets grow in the wake of these changes several years down the road.
Although some in the investment industry warn that significant reforms in the advice business will lead to a loss of access to advice for many investors, Jensen pointed out that there an increasing crop of alternatives that can meet the needs of a wide range of investors — including technology-driven options such as robo-advisors and other online services.
However, Jensen indicated that she doesn’t see robo-advisors as a threat to the traditional advice business. Rather, she suggests that technology will increasingly enable advisors to serve clients more efficiently by automating certain parts of their business, which will, in turn, support growth in their businesses.
Jensen acknowledged that it would “be great” if the market generated some of the reforms regulators have been pursuing in recent years — such as enhancing performance reporting and cost transparency. However, the reality, she said, is that these positive fundamental changes often must come from the regulators, because the industry wants a level playing field.
At the same time, Jensen also highlighted regulators’ sensitivity to the growing regulatory burden in financial markets, generally. She noted that the CSA will be publishing a paper in the coming weeks that will seek feedback on ways to reduce the regulatory burden for public companies and that this will be the first of three initiatives in this area.
The first paper will contemplate ideas such as moving from quarterly financial reporting to semi-annual reporting for issuers, along with possible changes to the reporting requirements designed to ease the compliance burden.
Following that, the regulators will address similar issues in the investment funds area, and will then look at the registrant rules after that.
In addition, Jensen noted that the OSC’s new whistleblower program, which offers rewards for information that leads to large enforcement actions, is having good results and has generated several investigations. These include alleged frauds, market manipulation, and illegal insider trading.
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