Stacked white books on rules and regulations

The Ontario Securities Commission (OSC) has released OSC Staff Notice 11-784 – Burden Reduction, for consultation with stakeholders. This notice aims to attract input on how the regulatory burden can be reduced for various market participants, and asks specific questions on rules and regulations that can be streamlined and harmonized. In addition, a Burden Reduction Task Force, in coordination with the Ontario Ministry of Finance, has been established to identify steps that can be taken to enhance competitiveness for Ontario businesses by saving time and money for issuers, registrants, investors and other market participants.

The key to reducing regulatory burden for financial planners and financial advisors is the harmonization of regulatory requirements across sectors and regions. Specifically, financial planners are giving holistic advice for their clients’ needs that span across various regulatory regimes in insurance, securities, mutual funds and exempt products. They may also have clients in different provinces across Canada that may have different rules. This non-harmonized regulatory regime certainly adds burden and costs for financial planners to do their work, and ultimately, increases the cost of advice for Canadians.

Although this initiative focuses on getting quick wins for Ontario, any improvements achieved must be harmonized with other provinces. To its credit, the notice and suggested process does mention the need for harmonization but this co-ordination must be extensive and go beyond the OSC’s jurisdiction. I have over the years pointed out to securities regulators the need for harmonization across all sectors and not just within the securities sector. Regulators have always responded that they only regulate securities. This may be true but this latest burden-reduction initiative can recommend and start the process toward national and sector harmonization in Canada. Work is finally progressing on a national securities regulator but this is just the beginning.

What are some specific measures that will reduce regulatory burden?

> Finalize the national securities regulator and harmonize rules across provinces.

> Redefine what a securities regulator is, and expand its mandate to include insurance and banking.

> Ensure that harmonization doesn’t mean a larger bureaucracy with more staff and the same level of fees being collected.

> Ensure only one registrant filing and set of fees is required to operate in Canada

> Combine the mandates of the Mutual Fund Dealers Association and Investment Industry Regulatory Organization of Canada.

> Refine mutual fund licensing and regulation as a subset of securities and streamline where possible.

> Use principles-based regulation where feasible.

> Enshrine a process to ensure only new rules that are required are introduced and old rules are reviewed and eliminated— in other words, a more targeted rule book that aims to regulate on a cost/benefit basis.

> Invest in advanced technology to reduce the costs of regulatory oversight for market participants.

> Specific for financial planners and advisors, review the registration, education and compensation models to reduce burden and ensure the viability of this advice channel for Canadian financial consumers:

For those giving advanced advice, move toward a “best interest” model, where financial planners make decisions in the overall interest of the client, and are regulated on these outcomes

Have one licensing regime for financial planners, and one licensing regime for financial advisors. In other words, there is one licensing process that allows you to achieve the proficiencies for one or more type of advising relationship for mutual funds, securities or insurance, whereas financial planning is an advanced licensing or certification

The related education requirements for these various licensing proficiencies must be consistent and not in duplication, where possible. Further, the annual continuing education requirements for these licences should give equivalencies when the advisor is multi-licensed

The needs of investor protection must be better balanced with financial advisor and financial planner regulations to ensure the cost of advice remains viable.

This list of recommendations may seem utopian, but if we can achieve some of these objectives, we will be closer to reducing regulatory burden in Ontario and, subsequently, the rest of Canada.