Regulators have gotten more specific about their prohibitions on registered reps referencing awards.
Building on an email to registered firms and representatives in August, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) added to their warning to registered firms and individuals about referencing — or merely participating in — awards based on sales, assets under management or revenue generation during client-facing interactions.
As stated in August, the regulators consider such references to be “a compliance deficiency.”
On Wednesday, the CSA and CIRO updated their frequently asked questions document related to the client-focused reforms, specifying additional types of client-facing interactions. The August email had mentioned award references on websites and LinkedIn profiles but, at the time, the CSA declined to comment on further examples.
The FAQ document now lists additional types of prohibited client-facing interactions for advisors:
- displaying an award or recognition in their physical or virtual office
- displaying an award or recognition in their signature block (hard copy or electronic)
- mentioning the award or recognition to clients verbally in meetings
- referencing the award or recognition in a media interview/publication
- emailing clients to tell them about the award or recognition
Both in the FAQ document and in the August email, the regulators suggested that participating in these kinds of recognition programs at all could be a compliance issue.
“Even in cases where the award or recognition is not referenced in advertising or marketing materials issued directly by a registered firm or individual, the publication of the results by the contest sponsors could be seen as a compliance deficiency,” they said.
The CSA and CIRO also expressed skepticism about recognition programs that claim not to be based on an advisor’s production.
“Even where the stated ranking criteria is not based on sales activity, revenue generation, or assets under management, the actual results we have observed in certain cases would suggest otherwise,” they said.
The regulators recommended that chief compliance officers and ultimate designated persons monitor their reps’ participation in any advisor ranking contest.
To ensure compliance with this guidance, the CSA and CIRO called on firms and reps to remove “references to the award or recognition in any marketing or client communications including on webpages or LinkedIn profiles.”
The regulators indicated that while they won’t be scrutinizing past participation in these sorts of programs, they will be assessing compliance during routine reviews and “will use all tools available along the compliance enforcement continuum to address any non-compliance.”
With files from James Langton