Canada’s provincial premiers are negotiating the enhancement of a little known provincial agreement called the Agreement on Internal Trade (AIT) to include more investment and securities activities. These changes could serve as an important blueprint for more uniform regulation under the new co-operative capital markets regulatory system (CCMR), which may result in lower regulatory burden for financial planners and financial advisors.

So, what exactly is the AIT? As you may be aware, Canada has more internal trade barriers for goods and services between provinces than we as a country have with other nations under free trade agreements. Thus, the AIT is an attempt to reduce these trade barriers within Canada as it falls under provincial jurisdiction.

Up until now, the removal of trade barriers for financial services has been limited. As a result, Canada’s provincial premiers are currently renegotiating the renewal of this agreement and are exploring the expansion of its reach to remove more barriers for the investment services and securities industry.

So, how can this be used to facilitate uniform regulation across Canada and less regulatory burden for financial planners and financial advisors? Negotiation of regulatory rules and administrative matters under the new CCMR will be a political exercise with provincial bodies vying to protect their revenue sources and spheres of influence, whereas, provincial legislators may have more latitude to remove barriers and harmonize rules for the good of the nation.

Subsequently, the CCMR will be required to adopt the work of the AIT when the regulator comes into operation and avoid some of the inevitable turf wars among CCMR members in negotiating administrative structure and rules.

Specific examples of regulatory burden relief for financial planners and advisors under this initiative include:

  • Securities regulation requires financial planners and advisors to be registered in the province in which their clients reside. This means obtaining individual registrations and paying fees to the various provincial securities commissions.

    For example, if a client moves from Ontario to Quebec, then his or her financial planner or advisor cannot continue to service that client’s account while the client lives in Quebec. There is a limited “mobility” exemption, but it too limited and conditional to be of much use. Therefore, premiers should remove barriers for financial planners and advisors wishing to provide services to clients who live in provinces other than those in which they reside.

  • In addition, financial planners and advisors must pay fees to each individual securities regulator in which they are registered. They must also know and abide by the administrative practices (often these remain unwritten and unknowable without personal experience) as well as different rules and policies of the various provincial securities commissions.

    The AIT should remove this barrier and require a uniform “one-registration” regime in which the financial planner or advisor can become licensed with a principal regulator and automatically obtain registration to allow him or her to do business in all jurisdictions of Canada, with no additional fees paid.

    Although the passport system that the Canadian Securities Regulators (CSA) employs attempts to do this, the Ontario Securities Commission has refused to sign onto the passport system. It is clear that we can remove these trade barriers and replace them with a “one-stop” Canadian registration and licensing regime.

  • Another example is the difference between insurance licensing and securities licensing. Although “dual’ registration is permitted by both insurance and the securities regulators, there are many differences in regulatory approaches and requirements.

    A specific example of these differences is that insurance regulators allow representatives to perform services through personal corporations (such as lawyers, accountants and other professional organizations) whereas securities regulators have been debating this issue for 30 years with no resolution. The provinces should create a one-stop licensing regime for both insurance and securities sales through the AIT.

Although the CCMR initiative is proceeding slowly, the provinces have an opportunity through the AIT to remove trade barriers that cause burden for financial planners and advisors in providing services across multiple provinces in Canada. This would help eliminate the turf wars among CCMR members over rules as the CCMR comes into operation and, additionally, harmonize rules in cases in which the CCMR will not be able to, such as the insurance sector and among the provinces that have not signed onto the CCMR.