CSA focuses on investor protection

The plan, which was approved by the various chairs of the provincial regulators at a meeting in June, indicates that the CSA’s priorities over the next three years “intend to reflect the CSA members’ commitment toward the enhancement of the Canadian regulatory framework, with particular emphasis on the implementation of investor protection initiatives.”

These plans to enhance retail investor protection will be focused largely on projects that are already well known and underway, such as the implementation of the second phase of the Client Relationship Model (CRM II), a point-of-sale disclosure regime for mutual funds and comparable products such as exchange-traded funds (ETFs).

It also references the ongoing examination of mutual fund fees and the question of whether to adopt a statutory best interests duty for financial advisors, although the plan doesn’t make any new commitments to those efforts. In terms of the mutual fund fee issue, the CSA says that it will conduct stakeholder consultations and determine the extent of the regulatory response, “as appropriate”. It will also continue to examine whether a fiduciary duty is necessary, and “feasible”; and, if so, the best way to implement it.

One promise that does appear to be new is a pledge to implement an oversight regime to monitor the effectiveness of the Ombudsman for Banking Services and Investments (OBSI). It also says that the CSA plans to proceed to mandate OBSI as the industry dispute resolution provider.

In addition to its investor protection priorities, the CSA says that its work will also focus on other fundamental areas of its mission, “such as access to capital for small and medium enterprises, shareholder democracy and protection, increased market regulation effectiveness, enhanced collective enforcement efforts and efficiency gains through the enhancement of CSA national systems.”

Again, many of these initiatives are already well known and ongoing. For example, it indicates that the CSA has agreed to explore equity crowdfunding as a possible way for small firms to raise capital. It’s committed to examining this possible exemption, while also refining and harmonizing prospectus exemptions generally, it says.

The plan says that the CSA will also continue to work on shareholder democracy issues, such as reviewing the proxy voting system, considering regulation for proxy advisory firms, and reforming the take-over bid regime. In terms of market issues, it pledges to examine the impact of the order protection rule and market data fees and, “if appropriate, develop a strategy to address any issues identified”; along with implementing oversight for credit rating agencies and OTC derivatives markets.

In terms of bolstering enforcement performance, the plan says that the CSA is seeking greater use of reciprocal orders, aims to improve information sharing and its surveillance capabilities, and is examining the development of a consolidated case management system.

Additionally, it’s also committed to building new national systems, such as SEDAR, SEDI and NRD, and indicates that it will look at consolidating data repositories. It also says that it will consider expanding the current passport system and mutual reliance to other regulatory areas, developing recommendations to streamline the legislative amendments process across different jurisdictions, and enhancing its project management process.

“The plan sets out, in a clear and comprehensive manner, the priorities the CSA has committed to pursue over the next three years,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC). “The plan itself is not static and over its life will be supplemented and influenced by capital market events and regulatory responses to these events.”