This year could be a “make or break” proposition for investor protection, the Ontario Securities Commission’s (OSC) Investor Advisory Panel (IAP) says in its latest annual report, published on Wednesday.
Specifically, 2017 “promises to be a monumental year” for enhancing investor protection, the IAP’s report suggests, provided that regulators follow through and, “introduce a best interest standard and eliminate conflicted compensation.”
Last year, the Canadian Securities Administrators (CSA) launched a consultation on a series of “targeted reforms” to client/registrant relationships and a possible best interest standard. In addition, the CSA is currently examining the prospect of eliminating embedded commissions.
The IAP has long advocated for these major reforms, and continues to hope that regulators will finally deliver. Says the report: “Will regulators move forward and do the right thing across all jurisdictions? Or will the OSC have to go it alone? One thing is clear: the time has come to introduce a best interest standard, eliminate conflicted compensation and embedded commissions, and address issues like titles that make it more difficult for investors to understand what they are getting.”
In the meantime, the IAP will continue to advocate for a best interest standard, the report suggests: “We will also continue to put our full support behind the OSC in this matter and, if necessary, will call on them to go it alone if at the end of the consultation period other commissions decide not to move ahead.”
The independent advisory group also calls on the proposed new co-operative regulator to establish a similar body under the new authority, if and when it does come into being.
“In 2017, we hope to engage directly with staff at the new Capital Markets Regulatory Authority to begin to provide an investor perspective into its important work,” the IAP’s report says.
“The year 2017 has the potential to be a transformative year for investor protection,” says Ursula Menke, the IAP’s chairwoman, in a statement. “But only if the OSC and other regulators act to introduce a best interest standard and eliminate egregious and systemic conflicted compensation practices at regulated firms. We also remain concerned that the future of the common regulator is not clear on investor engagement, including formal mechanisms for meaningful investor input, such as an Investor Advisory Panel.”
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