: Chambre de la Sécurité Financière - Submission

Montreal, June 17, 2016

BY EMAIL

Expert Committee to Consider Financial
Advisory and Financial Planning Policy
Alternatives
c/o Frost Building North, Room 458
4th Floor, 95 Grosvenor Street
Toronto, Ontario
M7A 1Z1

Subject: Comments from the Chambre de la sécurité financière in response to the preliminary recommendations proposed in the Preliminary Policy Recommendations of the Expert Committee to Consider Financial Advisory and Financial Policy Alternatives document dated April 5, 2016 (the “Consultation Paper”)

To whom it may concern,

In response to the invitation from the Independent Expert Committee (the “Committee”) set up by the Government of Ontario to consider financial advisory and financial planning policy alternatives, the Chambre de la sécurité financière (the “CSF”) is pleased to speak about its experiences in Quebec regarding many of the issues referred to in the preliminary policy recommendations indicated by the Committee in the Consultation Paper.1

Who we are

The CSF is a self-regulatory organization set up under An Act respecting the distribution of financial products and services (Quebec) (the “ARDFPS”)2 whose nearly 32,000 members hold certificates and registrations issued by the Autorité des marchés financiers (the “AMF”) in order to offer financial products and services in the following sectors:

  • Group savings plan brokerage;
  • Insurance of persons;
  • Group insurance of persons;
  • Scholarship plan brokerage; and
  • Financial planning.

The CSF is not a government organization; it is a legal entity that was given the status of self-regulatory organization (“SRO”) on February 1, 2004 by the Quebec legislator, thereby making it the first multidisciplinary SRO in Canada.3 It is therefore comparable in many respects to the IIROC and the MFDA.

As we will see below, for many, the distinctive value of the CSF’s organizational model lies in its multidisciplinary nature. It covers five distinct but complementary areas of professional practice. This role of harmonizing and standardizing the rules among all financial security disciplines helps protect the public and ensures that our members, who work in several different disciplines, comply with these rules.4

What we do

Since it began its work on October 1, 1999, the CSF has been carrying out the sole mission assigned to it under the ARDFPS: to protect the public. We carry out this mission by ensuring the training and ethics of our members and by administering a disciplinary process comparable to that of a professional order.

In fact, the CSF determines the rules of the Code of ethics of the Chambre de la sécurité financière (the “Code of ethics of the CSF”) (ss. 202.1 and 312 of the ARDFPS). These rules apply to financial planners, among others. The syndic of the CSF has broad investigatory powers (s. 340 of the ARDFPS).

Its role is to investigate further to receiving information that a representative has allegedly committed an offence under a provision of the ARDFPS or its regulations. This can be done on its own initiative or on receiving information from a third party.

Once the investigation is complete, the syndic may, if it deems it appropriate, decide to submit a formal complaint to the disciplinary committee regarding a member, or to impose an administrative measure. If the disciplinary committee finds that a representative committed an offence and finds them guilty, it can then impose sanctions up to permanently striking them off the roll, depending on the gravity of the offence in question.

The CSF is a “mandatory membership” organization, since our members must comply with our rules and be subject to our oversight under penalty of being excluded and not being allowed to practice.

The CSF also possesses other attributes of SROs that are internationally recognized, as defined in 2006 by the International Council of Securities Associations (ICSA)5. It is thereby:

  • subject to oversight by the AMF;
  • has common objectives with the AMF’s mission and it serves the public interest; and
  • it may be assigned functions and powers in addition to those assigned to it under the ARDFPS, by delegation from its regulator and the approval of the Government of Quebec.

Lastly, we should mention that the CSF does not engage in any activities with respect to representing the interests of its members, or any commercial activities that could conflict with its mission to protect the public or its self-regulatory role.

This was not always the case in the past. From 1905 to 1999, in a hybrid form of a self-regulatory and associative organization, thousands of individuals helped shape the professional identity of the financial service professionals who are now members of the CSF. Although over the years, the member associations have been replaced, their original ideals and values have not. From the 18 regional associations across Quebec, at the start, under the Provincial Association of Quebec Life Underwriters (PAQLU), from the PAQLU to the Association des intermédiaires en assurance de personnes du Québec (AIAPQ) and finally, in 1999, from the AIAPQ to the CSF, the ambition has always remained the same: professionalism of members serving the public.

Today, our organization is a pure SRO, without any associative role. To dispel any doubts about this, in 2014-2015, the CSF transferred its former regional sections into a separate and independent industry organization, as did the Investment Dealers Association of Canada in 2005.

Our comments

Below are the CSF’s comments on the Committee’s preliminary recommendations, in the order they were discussed in the Consultation Paper, with the appropriate references being made in each case.

1. Regulation of Financial Planning in Ontario

We recommend that Financial Planning in Ontario be regulated as follows:

  1. Regulation should be required of any individual or firm that provides Financial Planning services either expressly or implicitly through Holding Out by way of titles, described services or otherwise;
  2. Individuals who and firms that provide Financial Planning and whose Financial Product Sales and Advice activities are regulated by the existing regulatory framework for securities, insurance and mortgage brokering should have any associated Financial Planning activities regulated by their existing regulator or regulators for those who have more than one licence;
  3. Individuals or firms performing Financial Planning activities outside the current regulatory framework should have their Financial Planning activities regulated by the proposed Financial Services Regulatory Authority (FSRA).

These recommendations and the reasons that led the Committee to make them raises some questions that the CSF would like to comment on under the following headings:

  • Should the concept of financial planning be defined in the regulations?
  • Is it helpful to try and regulate financial planning as a separate activity?
  • What framework should be considered?

Should the concept of financial planning be defined in the regulations?

There is no regulatory definition of financial planning in Quebec. Without denying the added value of financial planning as an expertise performed by financial service professionals, it is nonetheless difficult to separate this activity from the other activities surrounding the offer of advice and the distribution of financial products and services.

In Quebec, only in exceptional circumstances is financial planning a truly specific and separate activity, and we believe that the situation is the same in Ontario. This is very likely why past attempts to define financial planning activities for regulatory purposes and, in particular, to determine who would have jurisdiction to regulate and oversee it, were difficult and met with little success.6

Moreover, experience has shown that any attempt to define the concept of financial planning in a standard-setting text — either specifically or in point form — risks having an indirect effect of granting the individuals, whose activities meet the definition, exclusivity to perform certain acts that, in terms of financial advice, are and should remain eligible to other groups of regulated individuals if we want to adequately protect the public (think of mutual fund dealer representatives or insurance of persons firms).

When the regulations for the distribution of financial products and services market were reformed in the late 1990s, the Quebec legislator was of course driven by a desire to ensure adequate consumer protection. This desire translated into the ARDFPS by allowing representatives working in other financial security disciplines to also enrol in the financial planning discipline, without granting those holding the title of financial planner the exclusive right to perform certain acts similar to financial planning, as they believed that many of the regulated persons should also be able to perform similar acts in the context of distributing financial products and services.

We believe that the Quebec legislator was right, as it is true that most of the professional activities performed by members of the CSF, advisory services that are similar to financial planning, are being performed concurrently with distribution activities. This close interrelation between advisory services and activities of distribution of financial products or services is, moreover, an underlying reason for imposing integrated ethical obligations.

We feel that using more or less general criteria to try and define the concept of financial planning would likely result in significant confusion in applying legislation that, like the ARDFPS, aims to regulate multiple disciplines (including financial planning) that overlap or are exercised by the same regulated person.

This confusion could also extend to the rights that can be exercised by clients or the ethical duties of representatives, whereas in Quebec, most financial planners hold other certificates in sectors in which they are required to perform certain actions that are akin to the concept of financial planning in the broad sense but not exclusive to it.7

The CSF does not therefore believe that it is appropriate to adopt a regulatory definition of financial planning, given the collateral application problems that would result on the oversight of the other advisory activities to which they are naturally attached.

Is it helpful to try and regulate financial planning as a separate activity?

The members of the CSF are called on to carry out professional activities in several different sectors that, depending on the intention introduced by the legislator in the ARDFPS, must be able to be combined and harmoniously integrated into their respective practice.7

The CSF agrees in principle with the fact that, ideally, clients should be able to identify the delivery of financial planning services from all the advisory or distribution services provided to them. Like many others, it finds that this recognition is not always easy. However, the regulations can help alleviate this.

In Quebec, the legislator wanted to limit the exercise of financial planning activities by imposing specific requirements on individuals who want to act as financial planners or purport to offer financial planning services, namely: 8

  • have a financial planner diploma;
  • with some exceptions, be registered with the AMF in this sector;
  • prepare a mandate signed by the consumer before performing financial planning services;
  • give the consumer a written financial planning report.

This therefore means that financial planners who only perform “purely” financial planning activities will limit their practice to this sole service. In fact, these limited activities of signing formal mandates and submitting written financial planning reports happen very infrequently in the market.

Since, in the majority of cases, financial planners who are members of the CSF not only act as financial planners but also as intermediaries who offer financial products and services, the best service to the public is to allow them to rely on greater consistency of the rules governing financial planning, on one hand, and advisory services relating to the distribution of financial products and services on the other.

Also, the rules that apply must allow clients to clearly understand that, in the case of financial planners who are not just performing the above-mentioned financial planning reports, their activities are usually associated with other activities involving the distribution of financial products and services and they meet the regulatory requirements.

What framework should be considered?

Although the relationship between members of the CSF and their clients may result in the purchase of a financial product or service, this result is always the outcome of a process based on analysis and professional advice, which first requires collection of information, discussions and information analysis, and then identifying whether a financial product or service meets the client’s needs and expectations.

Given that financial planning is generally exercised in close conjunction with the advisory services offered in other financial security disciplines, it is therefore desirable that the responsibility for regulating all these activities be done, where possible, by a single regulator. This regulator would thereby be in a good position to assess and make the appropriate distinctions among the advisory services and distribution practices in all these disciplines.

The multidisciplinary nature of SROs, such as the CSF, helps respond to the concern of efficiently regulating one individual who is carrying on activities in multiple disciplines, while ensuring harmonization and consistent systemic enforcement of the regulations that govern them.

This multidisciplinary approach is also a way to control the regulatory burden. Through consistent actions across related disciplines regulated by the same SRO, the multidisciplinary nature simplifies observance of the rules with which representatives who are present in several market niches must comply. It also improves the efficiency of the monitoring of all the activities carried out in the different disciplines.

The CSF therefore strongly supports the idea of putting in place a multidisciplinary regulator in Ontario. Along with this operation, we also recommend adding a multidisciplinary self-regulatory structure for this regulator, for the following reasons.

Self-regulation is one of the intervention methods that governments and financial regulators of the G20 prefer using to enforce the rules of good conduct of representatives, and to thereby protect investors. The IOSCO expressly recognizes the use of SROs to supervise financial markets and their participants.9 Also, for the Canadian securities industry, the International Monetary Fund encourages regulatory and supervisory efforts led by these types of organizations.10

There are many reasons for this choice, including the following:

  • SROs and their governance structures include (at least in large part) members of the industry who have detailed knowledge and experience of the regulated operations; by relying on the contribution of these individuals, SROs have faster and easier access to the information needed to efficiently manage complex situations and take informed positions required by their role to protect the public;
  • self-regulation ensures that the financial industry is monitored by an SRO that is familiar with the complexities of the activities and day-to-day management of the industry; a front-line regulator such as an SRO carries out close monitoring; it works close to the market, can react faster and has a better understanding of the activities carried out by the individuals being regulated;
  • self-regulation saves the State (the regulator) from having to pay the prohibitive costs and the inefficiencies of direct day-to-day regulation and monitoring of the functioning of complex capital or financial markets, and the myriad of transactions that are carried out;
  • self-regulation establishes a balance between the resources from the industry and those of the State: on one hand, it allows the individuals being regulated to be subject to self-funded monitoring by their peers, who are more familiar with their activities, through an SRO; on the other, it provides the State with the possibility of more effectively leveraging the limited resources to focus on overseeing the SRO itself and more fundamental problems, instead of devoting itself to centrally controlling a multitude of stakeholders and transactions that an SRO is able to perform more effectively at a comparable cost;
  • SROs are 100% self-funded; unlike stakeholders in the public sector or crown corporations, their expenditure budgets are not subject to approval by their governing bodies and are only used to pay for the supervision of their members;
  • by subjecting its members to its rules and oversight under the penalty of being excluded or losing the right to practice, a mandatory-membership SRO, such as the CSF, can regulate these individuals with greater flexibility and intervene more rapidly to put a stop to conduct that is harmful to the public;
  • the principles of ethics and good business conduct implemented by the disciplinary bodies of an SRO also allow it to react promptly, by imposing appropriate standards, in line with the continuous innovation of financial products and business practices; the public is therefore better protected.

The Quebec model for supervising the professionals in the financial products and services industry by an SRO works. It helps make the control and oversight regime of the multidisciplinary regulator more efficient, by including the contribution of proven approaches that the CSF has mobilized. For the AMF, the CSF’s SRO status represents an effective and balanced way to achieve the government’s objectives of simplification, creation of a one-stop shop, reducing costs, achieving efficiencies in the financial services sector and lastly, protecting the public.11

Centralizing the management structure of mandatory professional development for financial planners in Ontario with a single SRO would therefore help achieve these objectives even more, reduce their administrative burden by centralizing all their professional development activities within one body, and would ensure consistency through multidisciplinary regulation.

2. Harmonization of Standards

We recommend that the education, training, credentialing and licensing of individuals engaged in the provision of Financial Planning be harmonized and subject to one universal set of regulatory standards.

On several occasions in the past, the CSF has promoted the idea that consistency of the regulations governing the activities of one individual in several industry sectors is desirable, to ensure that the oversight of all these activities is effective and efficient.

Ideally, this consistency in the regulations should be sought out in a multifaceted approach:

  • among related disciplines or fields where the same regulated person usually operates in the same territory;
  • among regulations governing the financial product or service itself (the product or service and the financial institution or the “manufacturer”) and the distribution of this product or service (offer, advice, distribution, investment) in one territory; and
  • among the regulatory frameworks of the territories that comprise the same integrated national or international market where one regulated entity may be required to operate, such as the Canadian market.

The CSF also believes that the fact of having rules that are, as far as possible, the same on an interterritorial and interdisciplinary basis facilitates business among the sectors and territories, and has advantages for all stakeholders. SROs can easily provide this by the way they are structured.

We therefore welcome the recommendation of the Committee to harmonize the rules of ethics, training and discipline for intermediaries.

Lastly, given its SRO role in a group savings plan and scholarship plan brokerage in Quebec, the CSF was in favour of harmonizing the rules as a prerequisite to the implementation of a securities passport system (the “Passport System”)12 among Canadian territories.13

The CSF believes that the harmonization of the rules is required for the Passport System to work well. The primary aim of the Passport System is to make the knowledge of the markets and the regional expertise of several different authorities that acknowledge each other, available to a national system, as is done by the Canadian Securities Administrators (the “CSA”). The harmonization of the rules is a way of facilitating this multilateral collaboration and mutual recognition while respecting the respective competencies of the participants of the regime.

In our opinion, the fact of having harmonized rules in Canada facilitates the business among the territories participating in the Passport System and provides advantages for various types of stakeholders. By having mostly harmonized rules, the regulators and SROs can better coordinate among themselves, and the regulated entities in the industry can operate in several different territories and save on their compliance costs.14

Moreover, in keeping with our recommendation to use self-regulation to improve the quality of protection for consumers of related financial products and services financiers, which includes financial planning, the CSF recommends that the Committee, due to the importance of harmonization, that the SRO to which intermediaries will be required to join in Ontario have at a minimum (under the law or the regulator) delegated duties and powers in the following areas:

  • registration and certification;
  • adoption of rules to govern the conduct of intermediaries;
  • prescription of the terms and conditions of the policies and procedures of these intermediaries to ensure these regulations are complied with;
  • inspection of intermediaries to verify their compliance with these rules;
  • prescription of disciplinary sanctions that may be imposed by the disciplinary unit of the SRO, which could be exercised to harmonize these sanctions with those set out under the rules of other Canadian SROs.

3. Statutory Best Interest Duty / 4. Exemptions

We recommend that a Statutory Best Interest Duty (SBID) be adopted and applied to all individuals who and firms that provide Financial Product Sales and Advice and/or Financial Planning in Ontario. This SBID should be based on a uniform and codified standard of care.

We recommend that the only exceptions that should apply to the proposed universal SBID be as follows:

  1. The individual or firm is already subject to a SBID by virtue of his, her or its licensing and registration requirements (e.g. as in the case of portfolio managers);
  2. The individual or firm is already subject to a professional legal standard of care and fiduciary duty, and the advice being provided is solely incidental to his, her or its principal business or profession which is also regulated (e.g. as in the case of lawyers and accountants); and
  3. The individual or firm is a mere “order taker,” and no financial advice is being provided to the client, and the individual or firm is exempt from suitability requirements (e.g. as in the case of discount brokers).

The proposed Statutory Best Interest Duty (“SBID”) is similar to the obligation to act in the best interests of the client (the “fiduciary duty”), the inclusion of which in the standards of conduct for securities dealers and advisers in Canada was the object of two consultations by the CSA: one in 2012,15 and the other in 2016 (still underway).16 The recent Consultation Paper 33-404 describes this duty as follows:

“A regulatory best interest standard would require that a registered dealer or registered adviser shall deal fairly, honestly and in good faith with its clients and act in its clients' best interests, and that a representative of a registered dealer or registered adviser shall deal fairly, honestly and in good faith with his or her clients and act in his or her clients' best interests. The conduct expected of a registrant in meeting her, his or its standard of care would be that of a prudent and unbiased firm or representative (as applicable), acting reasonably. In complying with the standard of care, registrants would be guided by the following principles:

  1. Act in the best interests of the client;
  2. Avoid or control conflicts of interest in a manner that prioritizes the client's best interests;
  3. Provide full, clear, meaningful and timely disclosure;
  4. Interpret law and agreements with clients in a manner favourable to the client's interest where reasonably conflicting interpretations arise;
  5. Act with care.”

The goal of this recommendation of the Committee, which seems to us to be equivalent protection for Ontario consumers of financial products and services by legislatively imposing an SBID on their providers,17 is completely valid in a common law jurisdiction.

However, the rules of conduct applicable to our members in Quebec, which are consolidated in the laws and regulations, and the jurisprudence of the courts and disciplinary committees with jurisdiction over the industry, already impose standards of conduct, which requires them to act in the best interest of clients.

These standards are completed by the broker’s or advisor’s duty to inform and advice, along with their duties to prevent or manage conflicts of interest, which are enforced by the disciplinary committee of the CSF and the competent tribunals.

This is why in its response of March 1, 2013 to the CSA Consultation Paper 33-40318, the CSF made the point that a consolidation exercise in Quebec of the new regulatory standards of conduct for group savings representatives, even in the pursuit of inter-territorial consistency of consumer protection objectives (objectives that the CSF moreover shares), was not required as they have already been provided for. The CSF’s position, which seems to be shared by the AMF,19 has not changed.

5. Referral arrangements

We recommend that no individual who or firm that provides Financial Product Sales and Advice or Financial Planning be permitted to pay a referral fee to a third party for the referral of a customer or prospective customer who is to be provided with Financial Planning or Financial Product Sales and Advice, unless the other person or firm receiving the referral fee is regulated as a provider of Financial Product Sales and Advice or Financial Planning and owes a best interest duty to consumers. There must also be full transparency with respect to the referral arrangement, including compensation.

The CSF would like to point out that the Committee’s recommendations are more restrictive than the rules that currently govern client referral arrangements for securities20 and insurance of persons in Quebec,21 where it is possible to pay referral commissions to individuals not registered, provided that there is no commission sharing.

Considering that, in our experience, this more permissive plan has never really resulted in any enforcement problems to the detriment of consumers, we suggest that the Committee harmonize its recommendation with the rules governing the other disciplines to which financial planning will naturally be attached.

Moreover, the CSF agrees with the principle of transparency promoted by this recommendation.

6. Titles and Holding Out

We recommend that the use of titles by individuals and firms engaged in the provision of Financial Product Sales and Advice and/or Financial Planning be prescribed in order to reduce consumer confusion. More specifically, we recommend that:

  1. Regulators work together to develop a circumscribed list of approved titles that are descriptive of the regulated activities and that these are the only titles permitted to be used by individuals and firms in their Financial Product Sales and Advice and/or Financial Planning activities;
  2. Use of the title “Financial Planner”, whether explicitly or by Holding Out that this service is being provided, be limited to individuals regulated as outlined in Recommendations 1 and 2 above;
  3. Individual designations, qualifications, and credentials (other than professional, academic qualifications, and those approved by the Regulators) are not permitted; and
  4. Those engaged in providing Financial Product Sales and Advice and/or Financial Planning are not permitted to use corporate positions or titles given the consumer confusion that results and can result from the use of such titles.

To adequately protect the public, the risk of the misuse of titles or illegally providing advisory services in a financial security discipline (including financial planning) must be closely monitored.

To address this type of practice in Quebec, the ARDFPS and its enforcement regulations set out similar provisions to those contained in the various codes of ethics of professional orders. In particular, sections 461, 465 and 466 of the ARDFPS state that any person who acts as a financial planner, by using the title, the abbreviation or similar title or purports to be a financial planner or offering financial planning services without holding the title, is guilty of an offence. The power to institute penal proceedings for an offence under these sections is possible under section 492 of the ARDFPS.

Furthermore, the syndic of the CSF and its disciplinary committee also have disciplinary powers regarding a representative who uses the title or abbreviation of the title of financial planner, or purports to be as such or to offer financial planning services, without being authorized to practice as a financial planner. In practice, however, the disciplinary committee has yet to receive a complaint regarding the illegal use of titles or illegal practice of financial planning.

7. Central Registry / 8. Financial Literacy and Investor Education

We recommend that a single, free, comprehensive central registry be created and maintained, with adequate resources to provide a one-stop source of information for consumers regarding the licensing and registration status, credentials and disciplinary history of individuals who and firms that provide Financial Product Sales and Advice and/or Financial Planning to Ontarians.

We recommend that financial literacy and investor education of Ontarians be supported and actively encouraged in Ontario by government, regulators, public and private schools (through their respective curriculum bodies and school boards), non-profit organizations and the financial services industry.

The CSF agrees with both of these recommendations.

9. Issues for Further Consideration

We recommend that the Government of Ontario give further consideration to the following issues which we highlight yet fall outside our mandate:

  1. The need for simplified complaint and restitution mechanisms for consumers of Financial Planning and Financial Product Sales and Advice;
  2. A simplified approach to the investigation, prosecution and adjudication of consumer complaints related to regulatory offences in the provision of Financial Planning and Financial Product Sales and Advice; and
  3. A consumer-friendly process for recovery of financial losses by consumers.

For recommendation 9 b), the CSF would again like to emphasize that a multidisciplinary self-regulatory model such as its own relies on complaint management mechanisms (in which the CSF responds to consumer complaints and manages them by adapting them to various situations) and professional discipline that it offers to various stakeholders — consumers of financial products and services, public protection organizations, representatives, financial services firms, group savings brokers, financial institutions that manufacture these products and services, and others — the means to effectively express their dissatisfaction regarding a member of the CSF or their service delivery.

In addition to the applicable provisions of the ARDFPS, our syndic and disciplinary committee are subject to the application of certain provisions of the Professional Code.22 Since the peak in 2009 (the year after the global financial crisis) where it received 700 investigation requests, the CSF has handled an average of 590 investigation requests per year. Over the last five years, the syndic of the CSF has opened an average of 475 investigation files each year.

The disciplinary committee of the CSF is comprised of a chair and vice-chair who are appointed by the Minister of Finance. They are supported by five substitute chairs and close to 70 members of the CSF from various sectors who are selected to sit on the committee, which guarantees that members appearing before the committee will be judged before a group comprised of their peers acting in the same sector, and a lawyer.

Over the last five years, an average of 60 disciplinary complaints a year have been submitted to the disciplinary committee of the CSF and it sits for around 120 days a year. Over the same period, the preliminary investigation and due diligence work performed by the CSF in complaint files have helped obtain disciplinary convictions in over 95% of the files where charges were laid.

We should also point out that the decisions of the disciplinary committee that orders the paying of costs or fines can be carried out pursuant to the powers set out under the law and the fine collection rate is therefore exceptional. Moreover, these decisions are enforceable against a representative even though they have ceased their activities and are no longer a member of the CSF.

Through the disciplinary process and the publication of the decisions handed down, CSF professionals receive a lot of information and learn more about problem conduct to be avoided. This information allows us to better understand the needs of the public and those of our members, and to propose continuous adjustments and improvements to our supervision for the benefit of consumers.

We hope that these comments from the CSF will be useful to the discussions of the Expert Committee, and we are available to continue the discussion as needed.

Appendix 1

Official presentation of the CSF to the Expert Panel on Securities Regulation, Creating an Advantage in Global Capital Markets, July 15, 2008
http://www.chambresf.com/userfiles/files/pdf/fr/memoires/csf-memoire-20080715.pdf

Appendix 2

Response of the CSF to the Consultation Paper published on October 25, 2012 by the CSA,
March 1, 2013
http://www.chambresf.com/userfiles/files/pdf/fr/memoires/rep-devoir-fiduciaire-20130301-vf.pdf

 

1 See Financial Advisory and Financial Policy Alternatives, Preliminary Policy Recommendations of the Expert Committee to Consider Financial Advisory and Financial Policy Alternatives, Government of Ontario, April 5, 2016.

2 S. 284 of the ARDFPS

3 The CSF received its SRO status recognized by the AMF when An Act respecting the Agence nationale d'encadrement du secteur financier (R.S.Q., 2002, chapter 45) took effect on February 1, 2004. The act then became An Act Respecting the Autorité des Marchés Financiers (CQLR, chapter D-9.2) (the “ARAMF”).

4 Our members hold over 44,500 certificates and registrations in financial security disciplines, as many of them practice in more than one discipline. The majority of these members are women and are spread out across Quebec. Over the last 15 years, CSF membership has grown by 14.22%.

5 See Self-Regulation in Financial Markets: An Exploratory Survey, ICSA Secretariat, September 2006, page 3. The ICSA is the leading supranational umbrella organization for SROs working in the securities industry, whose action is recognized by international financial institutions and supranational organizations for financial standards, such as the International Organization of Securities Commissions (OICV-IOSCO).

6 As at March 30, 2016, 87% of the holders of a financial planning registration in Quebec were practising in at least one other sector or registration category.

7 For example, the duties to collect information, analyze data and conduct periodic reviews, which are not just reserved for financial planners, are also required of holders of certificates performing other financial security disciplines.

8 Ss. 11, 56, 57, 59 et seq. of the ARDFPS, ss. 8 and 9 of the Regulation respecting the pursuit of activities as a representative, and sections 49 and 50 of the Code of ethics of the Chambre de la sécurité financière

9 See Objectives and Principles of Securities Regulation, IOSCO, June 2010, Principles for Self-Regulation.

10 IOSCO Objectives and Principles of Securities Regulation — Detailed Assessment of Implementation, IMF Country Report No. 14/73, March 2014.

11 From this perspective, it is highly desirable that the proper conduct of financial planners, who mostly have more than one certificate and whose qualifications are not limited to just financial planning, but also include advice and distribution of other types of financial products and services, falls under a single disciplinary body.

12 Regulation 11-102 respecting Passport System (chapter V-1.1, r. 1).

13 See the brief of the CSF to l’Autorité des marchés financiers in response to the Consultation on the harmonization of mutual fund distribution regulations, December 6, 2010: http://www.chambresf.com/fr/medias/documentation/memoires/ [available in French only]

14 In its brief to the Hockin Panel, Official presentation to the Expert Panel on Securities Regulation, Creating an Advantage in Global Capital Markets, July 15, 2008, attached as Appendix 1, the CSF listed the main sources of regulatory costs as follows: (a) fundamentally different rules or disparate or conflicting administrative practices between one province or territory and another; (b) multiple regulators whose jurisdictions overlap and duplicate each other; (c) lost profits due to the fact that investors and intermediaries forgo Canadian capital markets and go with other markets that have more performing regulatory systems, thereby reducing their use or operating costs; and (d) lost economies of scale in developing and enforcing regulatory policies in multiple jurisdictions or, conversely, inefficiencies from having too many securities regulators in a single body.

15 See the Consultation Paper 33-403 of the CSA: The Standard of Conduct for Advisers and Dealers – Exploring the Appropriateness of Introducing a Statutory Best Interest Duty When Advice is Provided to Retail Clients, October 25, 2012.

16 See the Consultation Paper 33-404 of the CSA: Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives toward their Clients, April 28, 2016.

17 By “provider”, we understand that the Committee is mainly referring here to advisors and intermediaries, and not to manufacturers.

18 We have attached our brief submitted at the time as Appendix 2.

19 Consultation Paper 33-404, p. 3.

20 Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.7 et seq.

21 Code of ethics of the Chambre de la sécurité financière, s. 40, and ss. 24, 100 and 143 of the ARDFPS.

22 Regarding the powers and duties of the syndic of the CSF and the disciplinary committee’s power to impose sanctions.