A new Investment Funds Institute of Canada (IFIC) report aims to make the case that there’s no unanimity among global regulators on the optimal way to reform investment industry regulation.
IFIC’s report, Global Trends in Financial Services Regulation, explored recent reforms in various jurisdictions around the world as Canadian regulators are currently contemplating a series of possible reforms to the rules governing client/advisor relationships. These include a possible ban on embedded commissions, the potential introduction of a best interest standard (at least in Ontario and New Brunswick) and a set of planned changes to various other rules, including the know-your-client/know-your-product obligations, conflict rules and business title requirements.
IFIC, which has opposed a possible ban on embedded commissions and the introduction of a best interest standard in Canada, argues in the report that regulators in the rest of the world aren’t unanimous in how they are approaching investment industry reforms.
“Different jurisdictions also have approached the issue of potential conflicts of interest in different ways reflecting differing market characteristics and suggesting that there is no ‘silver bullet’,” the IFIC report states.
Although some countries have banned embedded commissions or adopted a best interest standard, most have merely sought to enhance disclosure, the report argues. Furthermore, the report adds that it’s too early to fully assess the impact of the more substantial reforms undertaken in certain countries.
Canadian regulators have shown themselves to be divided on some of these issues as well. Recently, the Canadian Securities Administrators (CSA) announced that although they’re all in favour of targeted reforms to certain industry requirements, only Ontario and New Brunswick are prepared to go ahead with a best interest standard at this point.
In the meantime, the comment period for the CSA’s consultation on a possible ban for embedded commissions closes next Friday, June 9.
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