While the financial services industry is going through unprecedented change in order to meet the needs of today’s consumers, Canada’s regulatory environment is struggling to keep pace. Much of this has to do with the complexity of the regulatory system in Canada and the inherent lack of co-operation among so many players.
We’ve seen first-hand the challenges of our splintered regulatory system. For example, the Ontario Securities Commission proposed the creation of a national financial services regulatory system 22 years ago. After four separate studies, corresponding reports and recommendations culminating in the Hockin Report in 2009, the notion was finally killed in 2012 following a Supreme Court of Canada ruling against the government. A year later, in September 2013, the introduction of a co-operative national securities regulator that would be “operational by July 2015” was announced. Yet, here we are in the summer of 2016, with no implementation in sight.
Similarly, several brave pioneers also put aside their differences and egos 22 years ago and first proposed the idea of a single professional certification for financial planning in this country and created the FPSC, then the Financial Planners Standards Council of Canada, convinced that all would rally around a unified financial planning profession in Canada. Yet, here we still are today, debating the identical issues regarding title and holding out requirements for financial planners. As a colleague of mine used to say, “It’s déjà vu all over again.”
Still, much has changed during this time. The old pillars have fallen; consumers are more astute; the financial services sector is looking to reinvent itself; and “fintech” is the new word of the decade. Yet, governments, regulators and the industry remain mired in the federal/provincial jurisdictional issues that are partly to blame for a ridiculously complex regulatory system that boasts 25 statutory regulatory bodies, two self-regulatory organizations and myriad non-statutory certification and professional bodies all trying to work out their unique role in the twisted web.
The question, then, is: Why do they all exist in the first place? At the end of the day, our governments and corresponding regulatory system exist for one overarching purpose: to protect the consumer through an efficient system that ensures appropriate safeguards.
Today, there’s unprecedented opportunity for positive change. On April 28, the Canadian Securities Administrators (CSA) released the sweeping CSA Consultation Paper 33-404 – Proposals to Enhance the Obligations of Advisers, Dealers and Representatives Toward Their Clients. A few weeks prior to that, on April 5, the Expert Committee appointed by the Ontario government to consider financial advisory and financial planning policy alternatives released its preliminary policy recommendations. A month earlier than that, Quebec’s government committed to a comprehensive review of major laws governing the province’s financial services sector. Finally, the Expert Advisory Panel appointed to examine the mandates of the Financial Services Commission of Ontario, Financial Services Tribunal, and the Deposit Insurance Corporation of Ontario also released its Final Report in March.
With no less than four extensive regulatory initiatives underway, momentum in favour of change is clearly upon us. However, if we are to create an effective and sustainable financial service sector, any regulatory solutions must:
- ensure there will be sufficient numbers of qualified advisors;
- mitigate consumer confusion;
- provide for access to quality advice for all;
- ensure that clients’ interests are first and foremost — and that advisors are held accountable for their actions;
- stipulate appropriately high proficiency and ethical standards;
- add no undue burden to stakeholders; and most critically,
- be efficient.
Therein lies the rub. How do we ensure an efficient solution when the Canadian constitution by definition works against such efficiency? The answer must lie in co-operation of unprecedented proportions. Thankfully, there are signs that pockets of such willingness for co-operation are beginning to emerge.
For example, the content of the CSA’s consultation paper demonstrated unprecedented transparency and openness by setting out publicly the thoughtful private discourse that had taken place among the regulators on the issue of best interest.
Such willingness for openness and transparency must continue and expand in the debate if we are to see success. Regulators, governments and the industry must all put aside short-term self-interest in favour of working co-operatively toward a new model.
Canada is a leader among nations in financial services regulation. However, this status is at risk unless we are willing to collectively let go of old school ideals and values of self-preservation at the expense of Canadians’ interests. Thus, it’s now time to work co-operatively to create a modern regulatory system for the benefit of all.