OSC chair David Brown has outlined the OSC’s plans to overhaul registrant regulation with a “Fair Dealing Model”. The shift from trading to advice has “made it critical to shape a model for fair dealing between the financial services industry and retail investors,” says Brown. He made the remark in a speech to the Investment Funds Institute of Canada’s Kick-Off Breakfast.

An OSC Advisory Group representing the mutual fund sector, institutional investors and retail investors, small and large firms, full-services and discount brokers, portfolio managers and financial planners have all been involved in consultations on a new model, said Brown.

The Advisory Group has identified several elements essential to fair dealing between the industry and investors:

– the regulatory system must aim to reduce disputes between financial service providers and their clients;
– it should aim to keep the costs of complying with new requirements
as low as possible, and costs must be matched by benefits;
– the system must not favour large or small firms;
– it should be adaptable to other jurisdictions and to all sectors.

It also proposed eliminating current categories of registration, replacing current KYC forms with a “fair dealing agreement,” and requiring service providers to issue a statement at point of sale explaining how it is compensated.

“While the consultation process will be carried forward with industry participants at sessions beginning later this month, I believe several key principles are apparent,” said Brown.

“First, responsibility has to be clearly allocated between the firm and the investor, and the firm’s representative and the investor. Second, transparency has to be ensured – regarding asset transformation services offered, risks, costs, remuneration, and conflicts of interest. Third, access by retail investors has to be promoted – access to opportunities, self-management of accounts, and the provision of services in a competitive market. Fourth, there must be zero tolerance for self-serving outcomes where the firm or the firm’s representative has a conflict of interest.”