The Toronto-based Portfolio Management Association of Canada (PMAC) supports a statutory fiduciary duty in arrangements that involve discretionary management, but opposes the introduction of a “best interests” duty for all financial advisors, warning that it would create added confusion.
PMAC, the trade group for the investment-management industry, published its submission to the Canadian Securities Administrators (CSA) on Tuesday as part of the ongoing consultations on a series of targeted reforms to existing requirements in areas including suitability, know your client, know your product and proficiency requirements. The CSA paper also contemplates an overarching principle to put clients’ interests first.
On the question of best interests, PMAC says that it “fully supports” the idea of a nationally harmonized statutory fiduciary duty for accounts that are managed on a discretionary basis. However, it opposes a regulatory best interest standard for advisors, generally, arguing that it will lead to confusion, particularly as it would not be adopted in all provinces.
Specifically, British Columbia is not considering a best interest standard, and regulators in several other jurisdictions have expressed some skepticism about the idea.
PMAC says in its submission that it’s concerned “the lack of agreement among the securities commissions with respect to adopting the best interest standard could result in different standards of care in different provinces causing confusion for investors.”
As for the so-called “targeted reforms” the CSA has proposed, PMAC argues that the changes would create a more prescriptive regime and that “a one-size-fits-all approach to regulation will not be in the best interest of investors.”
Instead, PMAC recommends taking a more tailored approach to reworking the existing regulations. “Focus should be on principles-based regulation for portfolio managers; a one-size-fits-all approach should be avoided.”
An earlier verision of this article mistakenly said PMAC supports the introduction of a statutory “best interests” standard in arrangements that involve discretionary management. It should have said PMAC supports a statutory fiduciary duty in arrangements that involve discretionary management, but opposes the introduction of a “best interests” duty for all financial advisors.
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