Frank Allen, Executive Director, comments on the CSA's Client Focused Reforms:

"FAIR Canada welcomes today's releases by the CSA concerning two critically important investor protection initiatives - the client-registrant relationship and mutual fund embedded commissions. Canadians expect and deserve to receive professional, objective financial advice that is free from compensation related and other conflicts that result in the firm and their representatives placing their own interests above those of their clients.

While FAIR Canada continues to believe in an overarching regulatory best interest standard governing the client-registrant relationship, we commend the CSA for developing a harmonized proposal for client focused reforms and look forward to better understanding the extensive and nuanced set of provisions proposed by the CSA, particularly the more robust conflict of interest regime and the broadened mandate for the client's interest coming first .

We will review with interest and assess the CSA's proposal to infuse the client's best interest into conflict of interest reforms, require registrant's to put the client's interest first when making a suitability determination and require clarification of what the client should expect from their registrant. FAIR Canada's consideration and comments on these provisions, coupled with the proposed strengthening of the suitability obligation and the know your client/know your product processes, will focus on their overall adequacy in ensuring that the client's interest is paramount and comes first in the client-registrant relationship. We are encouraged that the CSA's proposal is clear that disclosure will not in itself satisfy the obligation to address conflicts of interest (including compensation conflicts) in the best interest of the client. We view the requirements contained in the CSA proposal for accessible and non-misleading disclosure by registrants of titles, qualifications, available product offerings and costs of entering into an arrangement with a firm as an important step in the right direction for the benefit of investors.

FAIR Canada continues to believe that eliminating embedded commissions is the preferable regulatory course of action given the comprehensive, independent research findings (and our view that the market would be able to innovate and adapt), but we are pleased with the CSA's proposed policy changes to prohibit DSCs, eliminate trailing commissions for online brokerage accounts (discount brokerages) and require all existing and reasonably foreseeable conflicts of interest, including conflicts arising from the payment of third-party compensation (including embedded commissions), to be either addressed in the client's best interest or avoided. We look forward to better understanding how compensation conflicts will actually in practice be addressed in the client's best interest so that dealers and their representatives will not act on their conflicts of interest to the detriment of their clients.

FAIR Canada looks forward to working with the CSA and other stakeholders to implement reforms that put into practice available research and behavioural insights so that investors are better protected, receive advice in their best interest and are in a position to achieve better financial outcomes."

FAIR Canada has submitted comments regarding Canadian Securities Administrators (CSA) Staff Notice 61-303 and Request for Comment - Soliciting Dealer Arrangements. We agree with staff of the CSA that soliciting dealer arrangements raise a number of securities regulatory issues. We trust that the information and feedback sought by CSA staff in this Notice and Request for Comment will be of assistance in determining the appropriate additional rules and guidance for these types of arrangements. 

However, we do not believe further consultation is required with respect to the use of success only "VOTE FOR" soliciting dealer fee arrangements by boards of directors of reporting issuers in proxy solicitations. The "vote buying" practices used in these proxy solicitations by boards of directors run afoul of dealer conflict of interest rules, raise concerns under proxy solicitation requirements, undermine the integrity of the securityholder voting process and require immediate remedial action by the CSA to prohibit their use.

To read the submission, please click  here.

FAIR Canada welcomes the Proposed Amendments as a step in the right direction. The removal of prospectus and registration exemptions for securities that are syndicated mortgages is necessary given the lack of effective oversight and enforcement. These investments should be regulated like any other securities investment. 

We also call for risks to investors from real estate investments more broadly to be a focus of securities regulators. We are concerned about the regulatory framework for mortgage investment corporations ("MICs") and the investor losses and risks associated with MICs that have been highlighted in media and independent reports and call for the mortgage investment regulatory framework to be examined and strengthened.

FAIR Canada's recommendations to securities regulators with respect to the regulation of syndicated mortgage investments include requesting securities regulators to:

Click  here to read our full submission.