: Chartered Professional Accountants of Ontario - Submission

VIA EMAIL: Fin.Adv.Pln@ontario.ca

June 17, 2016

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

Dear Sirs/Mesdames:

Re: Preliminary Policy Recommendations of the Expert Committee to Consider Financial Advisory and Financial Planning Policy

We are pleased to provide the comments of Chartered Professional Accountants of Ontario (“CPA Ontario”) in response to the Preliminary Policy Recommendations (the ”Recommendations”) of the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives (the “Committee”), released on April 5, 2016.

About CPA Ontario:

CPA Ontario is the self-regulatory organization and professional association for Ontario’s 87,000 Chartered Professional Accountants (CPAs) and over 20,000 CPA students. CPA Ontario fulfils its statutory mandate to protect the public interest by ensuring its members meet the highest standards of expertise, integrity and ethical conduct. An estimated 15,000 Ontario CPAs participate in the dispensation of financial advice to the public, either through public accounting practices – serving as trusted advisors to both business and individual clients and their family members, or as registered/licensed employees of financial services industry participants. Anecdotal evidence indicates that this number continues to grow.

General Comments:

We have reviewed the Recommendations and, in general, support the Ontario Ministry of Finance’s efforts to strengthen the regulatory framework for individuals who offer financial advice and financial planning services to Ontario consumers. We agree with the Committee’s view that consumers may be confused by the variety of advice and services offered by participants in the financial services industry. However, we note that there are already longstanding and rigorous professional and government regulatory regimes in place for most individuals providing financial advice to consumers today (including CPAs) and believe it to be important that any new regulatory initiatives should address specific and identified harms as opposed to duplicating existing requirements or resulting in the “layering on” of additional rules on individuals already subject to rigorous and focused regulation.

We are also aware of and support in principle the recent submissions made to you by the American Institute of Certified Public Accountants and the Canadian Advocacy Committee of the CFA Institute. Subject to the discussion below, we join them in submitting that an important step forward in increasing protection for Ontario consumers is to ensure that existing regulatory regimes applicable to financial services participants, particularly those involved in the provision of financial advice to individual consumers, should include a “best interests of the client” standard of care, particularly in situations where potential and actual conflicts of interest arise, either from the advisor/client relationship or industry structural issues like the payment of commissions by third parties. We also support and join them in calling for widespread consultation and participation in connection with the development of any future standards.

For over 150 years, professional accountants - members of CPA Ontario and its predecessor organizations have provided clients with sound, competent advice on a full range of personal financial matters, including business succession, retirement and estate planning and personal taxation. Today, Ontario’s CPAs are consummate professionals. Each has successfully completed post-secondary education and/or pre-certification training in many of the disciplines that comprise financial planning including, at a minimum: personal taxes, financial instruments and business law and estate planning. In addition, CPAs in Ontario and across Canada are subject to the CPA Code of Professional Conduct (the “Code”). The provisions of the Code require, inter alia, that CPAs (1) attain and maintain professional competence in each area in which they may choose to practice1, (2) comply with CPA Ontario firm registration requirements (including prohibitions on the limitation of liability and mandatory errors & omissions insurance coverage) for practices offering advice and services directly to the public, and (3) comply fully with any other regulatory requirements attaching to their various business activities. For example, CPAs engaged in the distribution of securities or mutual funds or life insurance products must comply with Investment Industry Regulatory Organization of Canada (“IIROC”) and Mutual Fund Dealers Association of Canada (“MFDA”) membership requirements and rules or Financial Services Commission of Ontario (“FSCO”) licencing requirements. As will be discussed in more detail below, CPAs also have a stringent Rule requirement to manage or avoid situations of conflict of interest.

CPA Ontario maintains ongoing oversight of CPA firms through a mandatory practice inspection program and a well-resourced, complaints-driven professional discipline process.

Specific Comments on Preliminary Policy Recommendations:

1. (a) Regulation of any individual who or firm that provides Financial Planning services.

(b) Individuals who are currently registered, licensed or otherwise regulated, should have associated Financial Planning activities regulated by existing regulator(s).

(c) Individuals or firms performing Financial Planning activities outside the current regulatory framework should be regulated in respect of these activities by the proposed Financial Services Regulatory Authority (“FSRA”).

We support the recommendation that individuals and firms “holding out” as providing financial planning advice should be regulated. We note that regulated professionals in Ontario (e.g. CPAs and lawyers) appear to have been omitted from the “existing regulatory framework” discussed in the recommendations. As noted above, this is a significant omission. CPA Ontario is the statutory self-regulatory body for Ontario’s CPAs and should clearly be considered an important part of the existing regulatory framework for financial advisors and planners. Ontario CPAs provide financial advice and planning services to the public in many ways. CPAs in public accountancy practices will generally provide such advice as “incidental” to their accounting advice, and may or may not couple this advice with referrals to third-party product or service providers who may assist with implementation. Others are directly engaged in financial planning and will hold themselves out as such. Regardless of how advice and/or services may be provided, all CPAs are subject to a rigorous professional regulatory regime that addresses many of the concerns sought to be addressed by the Recommendations, including stringent initial and ongoing proficiency requirements, and requirements to provide objective advice and avoid conflicts of interest. These latter requirements include disclosure, the adoption of safeguards and resolving such conflicts in favour of the client, or withdrawing from an engagement where the conflict cannot be satisfactorily resolved. Accordingly, we submit that Ontario CPAs who are not currently regulated by other financial services regulatory agencies are adequately regulated under their current regime of professional regulation and should, therefore, not be made subject to additional regulation by the proposed FSRA.

2. Education, training, credentialing and licensing standards should be harmonized.

We support, in principle, the harmonization of standards relating to the proficiency, licensing and conduct of individuals and firms offering Financial Planning to the public. Given the diversity of financial professionals engaged in some or all of the activities comprising Financial Planning, we recommend the establishment of and look forward to participating in, broad consultations in this regard. We submit, however, that such consultations must include the current professional regulatory bodies like CPA Ontario and The Law Society of Upper Canada. Given the core role that members of CPA Ontario play in the provision of Financial Planning advice and services, the role that the professional bodies play today on the regulation of financial professionals, and the extensive experience of each with regard to the standards-setting process, we are of the view that we have much value to offer to any consultative process.

3. Adoption of a statutory “best interests” duty (“SBID”).

CPA Ontario is required by statute to “promote and protect the public interest by governing and regulating the practice of individuals and firms. . .”2 As discussed above, this duty is imposed on individual CPAs and firms through CPA Ontario’s Bylaws, Regulations and the CPA Code of Conduct which requires individuals and firms to conduct themselves in accordance with the following five overarching principles:

  • Professional Behaviour - CPAs conduct themselves at all times in a manner which will maintain the good reputation of the profession and serve the public interest.
  • Integrity and Due Care - CPAs perform professional services with integrity and due care.
  • Objectivity - CPAs do not allow their professional or business judgment to be compromised by bias, conflict of interest or the undue influence of others.
  • Professional Competence - CPAs maintain their professional skills and competence by keeping informed of, and complying with, developments in their area of professional service.
  • Confidentiality - CPAs protect confidential information acquired as a result of professional, employment and business relationships and do not disclose it without proper and specific authority, nor do they exploit such information for their personal advantage or the advantage of a third party.3

Taken together, we submit that these principles, which are elaborated upon in the Code and rigorously enforced, impose a “best interests” duty upon CPAs in Ontario and elsewhere. Clients, employers and the public generally expect that CPAs will bring objectivity and sound professional judgment to their services. This expectation requires that a CPA will not subordinate professional judgment to external influences. The principle of objectivity also underlies the Code provisions related to potential conflicts of interest as well as the heightened requirement for independence in relation to the performance of specified assurance engagements. With respect to both independence and conflicts of interest, the profession employs the criterion of whether a reasonable observer would conclude that a specified situation or circumstance posed an unacceptable threat to a member’s or firm’s objectivity and professional judgment so that public confidence in the objectivity and integrity of the member or firm be sustained.

4. Exemptions from the SBID.

For the reasons discussed above, we submit that CPAs providing financial planning advice who are not currently subject to IIROC, MFDA or FSCO registration or licensing requirements are already subject to a similar standard. With respect to CPAs who will, as a result of securities registration or insurance licensing, be subject to additional rules, we submit that consultations with CPA Ontario should be undertaken to achieve a harmonized standard and avoid the implementation of conflicting rules.

5. Referral Arrangements.

The Code sets out specific rules regarding the acceptance of commission or referral fees by CPAs. The thrust of these rules is to prohibit payment or acceptance of such fees from non- CPAs in circumstances where such payment or acceptance would create a conflict of interest that cannot be addressed by disclosure to the client, obtaining the client’s informed, written consent, and the adoption of procedural and/or other safeguards by the CPA and/or firm. We submit that these rules are sufficient to govern CPAs who are not currently subject to IIROC, MFDA or FSCO registration or licensing requirements.

6. Titles and Holding Out.

We note that the regulated professions in Ontario (including CPA Ontario) currently regulate use of professional and academic designations by their members. Accordingly, further regulation of titles/designations should be imposed by and through the “existing regulatory framework”, and made applicable only to individuals who are registered/licenced through those organizations. Where such organizations propose to regulate CPAs who are also subject to their jurisdiction, we would expect to engage in consultations to avoid the imposition of conflicting requirements. For greater clarity, CPAs engaged in the provision of Financial Planning services only in the course of their accounting practices, should continue to be able to hold out as providing such services.

7. Central Registry.

CPA Ontario maintains a publicly-accessible record of the discipline history of members who have been found guilty of professional misconduct and sees the utility of establishing such a central registry for other financial advice-givers. We note, however, that reputations are important to those who depend on client trust and caution against maintaining a public record of complaints that have not resulted in formal disciplinary proceedings resulting in the imposition of sanctions. We are also aware of the difficulty and complexity of creating and maintaining accurately such a registry across a number of financial industry sectors. In addition, we are aware of a recent, similar initiative in Australia which we are advised has had the unintended consequence of creating a list of financial advisors that the public interprets as being somehow “government approved.” Accordingly, while we are supportive in principle of such a registry, we will reserve our specific comments beyond recommending that a cross-industry consultation process should be undertaken to design and implement the registry in the event that this recommendation goes forward.

8. Financial Literacy and Investor Education.

CPA Ontario, and its national affiliate CPA Canada, believes that all Canadians regardless of age or income should have the ability to access free, objective financial education. That is at the core of CPA Canada’s award-winning financial literacy program which is delivered through our network of 11,000 trained CPA expert volunteers in all provinces. Our 34 financial education sessions cover these key areas:

  • Adults
  • Seniors
  • Workplace
  • School (Elementary & High School)
  • Post-Secondary Students
  • New Canadians
  • Small & Medium Business
  • Entrepreneurs

This unique program gives CPA volunteers the opportunity to leverage their skillsets, knowledge and expertise to help Canadians of all ages improve their fundamental money management skills as a public service. This program has been internationally recognized as a world leader, winning six Excellence in Financial Education awards from the US-based Institute of Financial Literacy.

9. Issues for Further Consideration.

(a) Simplified consumer complaint and restitution mechanisms.

(b) Simplified investigation, prosecution and adjudication of consumer complaints related to regulatory offences.

(c) Consumer-friendly process for recovery of financial losses by consumers.

We note that these issues are outside of the scope of the Committee and reserve comment for future discussions on these important topics. We would note, however, that the regulated professions in Ontario maintain robust, complaints-driven professional discipline processes and have significant experience in this area that could inform future consultation processes.

Thank you for this opportunity to provide our comments on this important matter. Please contact the undersigned directly at: 416-969-4200 or: cwilding@cpaontario.ca should you require additional information or wish to discuss our submissions.

Yours truly,


By: Carol Wilding, FCPA, FCA
President & Chief Executive Officer


CPA Ontario: Professional Development Courses Offered in Areas Associated with Financial Planning

Courses relating to financial planning that were offered in CPA Ontario’s Professional
Development catalogue for Fall/Winter 2015 and Spring/Summer 2016:

Advanced Issues in Estate Planning for Private Corporation Owners
Advanced Personal Cross Border Issues
Advanced Tax Planning Strategies
Brilliant Execution - Compliance Requirements for Successful Tax Planning
Building Your Own Retirement Pension with Annuities
Cash Cows, Pigs and Jackpots - The Simplest Personal Finance Strategy Ever
Catching Up - Five Years of Income Tax Developments
Corporate Reorganizations (excluding Section 85)
Corporate Tax Returns
Creating a Financial Plan
Crushing Debt - Everything You Need to Know About Government, Bank and Personal
Death and Taxes
Demystifying the U.S-Canada Income Tax Treaty
Designing Your Retirement Income
Elder Care - The Risks of Incapacity & Undue Influence
Enough Bull - How to Retire Well Without the Stock Market, Mutual Funds or Even an
Investment Advisor
Everyday Income Tax Issues for the General Practitioner
Family Business - The Essentials for the Trusted Advisor
Family Law and the Income Tax Act
General Practitioners - "Need to Know"
Getting a Grip on RDTOH, CDA & Other Tax Accounts
High Risk Areas of Tax
HST/GST & QST- Cross Border Issues
HST/GST & Real Property
HST/GST Refresher
HST/GST Update
Income Splitting
Income Tax Issues Dealing with Real Estate
Income Tax Planning Refresher - Corporate
Income Tax Planning Refresher - Personal
Income Tax Update - [2015]
Income Tax Update [2015] - Industry
Income Taxation of Portfolio Investments for Individuals
Interest, Penalties & Taxpayer Relief
Introduction to U.S. Corporate Taxation
Investing in Stocks, ETFs & Mutual Funds - Beginner's Tools for Better Investing
Life Insurance Planning for Owner-Managed Private Corporations
Ontario Family Law for Accountants
Personal Investing
Personal Tax Returns
Personal Tax Returns Workshop
Purchase & Sale of a Business - Income Tax Issues
Responsibilities of an Executor
RIP - Tax Compliance Matters Related to Terminal Filing Preparation
RIP- Estate Planning to Minimize Tax Leakage
Section 85- Transfer of Property
Smoke and Mirrors - Financial Myths that will Ruin Your Retirement Dreams
Tax Decisions with Long-Term Implications for the General Practitioner
Tax Issues in Shutting Down a Corporation
Tax Issues in Starting a Business
Tax Planning for Private Enterprises on Business Succession
Taxation of Domestic Family Trusts - Advanced
Taxation of Domestic Family Trusts- Basic
The Procrastinator's Guide to Retirement
Top Ten Mistakes Canadian Accountants Make Regarding U.S. Taxes
U.S. Real Estate - Personal Investment, Canadian and U.S. Tax Implications
U.S. Taxation of Individuals - Basic
U.S. Taxation of U.S. Citizens Living Abroad
Understanding Fees, Commissions and Other Costs of Investing and Insurance in
Understanding Wealth Management Options in Canada
Unveiling the Retirement Myth
What's Next - Ten Success Factors to Best Manage Retirement


1 CPA Ontario maintains a robust, mandatory Continuing Professional Development program. A list of current topics relating to financial planning is attached to this letter as Appendix 1.

2 Chartered Accountants Act, 2010 (Ontario) – subs. 4 (a – e).

3 CPA Code of Professional Conduct, Introduction.