At the end of September, the longest regulatory consultation period in recent memory came to a close. Here’s hoping that it doesn’t prove to be a colossal waste of time.
When the Canadian Securities Administrators (CSA) released its latest set of proposed reforms for retail investment regulation in April, including discussion of a “best interest” standard and a series of targeted reforms, the CSA knew that the industry would need a long time to digest those reforms. So, the CSA published its proposals for a 120-day comment period rather than for the usual 90 days. Then, the deadline was extended to the end of September.
The industry appears to be making good use of that time by engaging in extensive internal deliberations and crafting thoughtful responses to the regulators’ wide-ranging reform proposals. In the months ahead, the regulators will be holding public hearings to explore the issues raised in the initial paper and the forthcoming replies.
Yet, despite all the time and effort being expended on this project, shaking the feeling that it’s all a bit of a charade is hard to do. The industry is likely to state its interest in high standards, but campaign aggressively against reforms.
In turn, regulators will insist on their commitment to strong investor protection, only to be chastened by the prospect of determined industry opposition. And, as a result, the debate will be left to drag on for years.
Recall that regulators took about 15 years to get the client relationship model reforms off the ground. And, by the time, actual changes were put into effect, many of the principles underlying the original proposals had been altered. And the underlying issues that motivated regulators in the first place were never resolved. Indeed, many of the same basic concerns are driving the regulators’ current proposals (and their upcoming bid to ban embedded fees).
It’s time to resolve these issues once and for all, to commit fully to putting clients first and to stamping out conflicts. Investors and, ultimately, the industry, will be better for those efforts in the end.
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