The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) has issued a statement expressing the organization’s disappointment that only Ontario and New Brunswick are prepared to pursue a regulatory best interest standard.
“We do not understand the decision by the other jurisdictions that Canadians should not have the financial services industry act in their best interests,” says FAIR Canada, which has long called for regulators to introduce a best interest standard, in a statement. “Instead, these jurisdictions are willing to accept existing business models that harm consumers rather than implementing meaningful reforms that will serve the interests of Canadians.”
FAIR Canada maintains that the proposed targeted reforms the CSA’s members favour “will not properly address the problems associated with conflicts of interest and conflicted compensation structures.”
These reforms will still allow firms to rely on disclosure to deal with conflicts, which historically has not been effective, FAIR Canada states. Rather, the organization insists that “conflicts must be addressed at a structural level” by banning embedded compensation models and “eliminating unrealistic sales targets,” adding that this approach would also allow the industry to reduce the burden of producing disclosure to deal with conflicts.
Despite the setback for investor advocates that the provincial securities commissions in Alberta, Quebec and Manitoba have abandoned efforts to introduce a best interest standard, FAIR Canada says it’s “optimistic that meaningful change related to a best interest standard will eventually proceed in Ontario and New Brunswick, to be adopted later by the other provinces and territories.”
Yet, this decision has now also turned FAIR Canada against the proposed Co-operative Capital Markets Regulator (CCMR). In the past, FAIR Canada has supported the effort to create a national regulator. Now, the organization says it “opposes the elimination of the [Ontario Securities Commission] and the [Financial and Consumer Services Commission] and their replacement by the proposed Co-operative Capital Markets Regulator.”
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