Guidance stresses that titles that convey expertise in seniors’ issues or retirement planning should face particular scrutiny
The Investment Industry Regulatory Organization of Canada (IIROC) issued final guidance Monday that establishes its expectations for advisors’ use of particular business titles.
IIROC’s new guidance sets out the regulator’s view on the responsibilities of reps and dealers when it comes to the use of titles and proficiency designations by reps that deal with the public; and it identifies supervisory best practices for firms designed to improve transparency regarding the use of titles and designations.
Investor advocates have long complained that the indiscriminate use of titles in the securities industry can signal an advisor’s experience, expertise, or seniority that may mislead the average investor. In general, the guidance makes it clear that reps cannot hold themselves out as having experience or qualifications in a way that “deceives or misleads, or could reasonably be expected to deceive or mislead, a client”.
In particular, it advises that “it should be recognized that certain business titles can be confusing to the average investor and/or imply the individual performs a particular function at a firm or has particular expertise. Similarly, business titles can give rise to certain client expectations or help to create an unfounded feeling of trust, comfort or prestige.”
It also stresses that titles that convey expertise in seniors’ issues or retirement planning should face particular scrutiny, “to ensure any individual using such a business title is appropriately qualified and competent in that area.”
“To mitigate against public confusion and increase public understanding of an individual’s registration status, business titles should be coupled with public disclosure and a plain language explanation of the individual’s IIROC approval category, corresponding proficiencies, and the fact that IIROC is the licensing body,” it says.
Next: Firms expected to have policies
Firms expected to have policies
The guidance also stresses that IIROC expects firms to have policies and procedures relating to the use of titles and designations “that promote greater transparency for potential and existing clients, particularly the more vulnerable and less sophisticated investors.” It notes that these policies should be adapted to the firm’s business model and account offerings, and should be clearly communicated to reps and enforced by the firm.
IIROC advises that firms should consider centralizing the process of reviewing and approving the use of titles, and that the responsibility for monitoring their use should be assigned to a specific individual or department within the firm.
The notice indicates that the comments IIROC received on a draft version of this guidance was generally supportive of its efforts, but that some argued that the regulator should mandate and/or prohibit the use of certain titles to ensure consistency within the industry and reduce investor confusion. It notes that it considered introducing rules mandating the use of specific business titles, but decided against it for several reasons.
Instead of specific rules, the guidance is intended to “provide a principles-based framework” to help dealers supervise the use of titles. “Given the principles based approach we have adopted, we have added some additional guidance to address some of the broader themes underlying the comments… and provided some specific examples where practical,” it notes.