Last week, CSA said it plans to release a consultation paper in late April proposing enhancements to the obligations of firms and advisors towards clients. This paper, CSA said, follows the regulators’ 2013 consultation on the appropriateness of introducing a statutory best interest standard where advice is given to retail clients.

While it’s still uncertain what we’ll get in April, you’ve picked the odds-on favourite if you think a best interest standard’s in the hopper.

Read: CSA appears poised to propose best interest standard

Today, IIROC released a notice, “Managing Conflicts in the Best Interest of the Client,” that references CSA’s announcement and drops some useful clues as to the SRO’s thinking.

“We agree with the CSA that regulatory action is required to better align the interests of registrants to the interests of their clients, to improve outcomes for clients,” says the IIROC notice. “And we are committed to working with the CSA through this consultation process to ensure a consistent standard of care for all regulatory platforms.”

Read: IIROC imposed more sanctions, collected less in 2015

IIROC’s focus, the notice continues, is “the management of compensation-related conflicts of interest, which we believe is a key part of any discussion regarding the alignment of registrants’ interests to those of their clients.”

The notice adds: “The need for this alignment is already a guiding principle inherent within IIROC’s current regulatory regime. We believe that, taken together, our Dealer Member Rules and guidance put the best interest of the client before the interests of IIROC-regulated dealers and their representatives. We acknowledge that further clarification of our rules and guidance may be necessary to make this point absolutely clear.”

The SRO’s release signals next steps for advancing this priority of managing compensation-related conflicts. IIROC will:

  • immediately enhance its compliance test procedures to more closely examine compensation grids, supervisory oversight of advisors recommending products with high commissions, and the monitoring of advisors approaching compensation thresholds;
  • by June 2016, conduct a comprehensive survey to gather more detailed information on the oversight and monitoring of compensation-related conflicts by Dealer Members to ensure that IIROC can accurately and completely assess the quality of the controls being used;
  • conduct follow-up targeted examinations of Dealer Members where concerns arise from the results of the survey; and
  • use the survey and examination results to inform the appropriate regulatory response. This may include rule amendments and/or additional guidance on conflicts of interest that clearly and in plain language outline IIROC’s best interest requirements.

Read the complete IIROC notice here.

Also read:

OSC’s draft priorities target advisor comp and best interest standard

Disclosure is broken: CSA best interest roundtable (from 2013)