Key retail investor protection initiatives — including efforts to curb conflicts of interest, bolster advisors’ obligations and enhance transparency — remain atop the securities regulators’ agenda for the years ahead.
On June 13, the Canadian Securities Administrators (CSA) published its plans for the coming years (through 2022), in which measures such as the proposed client-focused reforms and reforms to fund-industry commission structures continue to feature prominently.
Enhancing the advisor-client relationship and revising the rules to improve investor protection are among the regulators’ top strategic objectives for the next several years, the paper said.
“The CSA aims to enhance the quality of recommendations made to investors; clients’ understanding of their relationship with their advisors; the client’s ability to secure redress for harms caused by registrants; and to improve the advisor-client relationship by specifically addressing issues of financial exploitation and cognitive impairment and fee transparency,” it said.
To that end, the CSA said it will be finalizing its rule proposals, known as the client-focused reforms, which will revise suitability, conflict of interest, KYC and KYP rules to improve the alignment of client and advisor interests.
It also said it will propose rule changes to “mitigate the conflict of interest and related investor harms arising from the use of the deferred sales charge (DSC) purchase option and discontinue the payment of trailing commissions by fund organizations to dealers who do not provide suitability advice.”
Other retail sector priorities include improving fund fee transparency, developing a framework to address issues of financial exploitation and cognitive impairment among vulnerable investors, and strengthening the powers of the Ombudsman for Banking Services and Investments (OBSI).
The CSA also said it will be examining novel challenges, such as the use of social media by activist short sellers, and regulating issues that arise from innovations such as blockchain/crypto.
In terms of financial stability, the plan indicated that the CSA aims to finalize and adopt a new framework for overseeing the over-the-counter (OTC) derivatives markets, and to implement a regulatory regime for financial benchmarks.
Additionally, the CSA said that it plans to analyze the differences between the regulatory regimes that apply to various industry segments, including investment funds, venture capital, private equity and mortgage investments, “for evidence of regulatory arbitrage and inconsistent investor protection.”
At the same time, the regulators also intend to ramp up their efforts at streamlining regulation to enable innovation, without compromising investor protection.
For instance, the CSA will be streamlining the issuers’ disclosure requirements, enhancing electronic delivery and rationalizing investment fund disclosure “to remove redundant and ineffective disclosure and reporting requirements to reduce the regulatory burden for investment funds and provide more streamlined and useful disclosure for investors,” it said.