In a recent letter, the Canadian Exchange-Traded Fund Association (CETFA) says it’s in favour of the CSA’s efforts to examine the fiduciary duties of advisors and dealers.
After reading the CSA’s consultation paper 33-403 on the standard of conduct for advisers and dealers, all members agreed “the current standard of conduct owed to investors is inadequately understood by the retail public, and while there are continuing efforts towards improving the financial literacy of Canadian investors, there are still substantial gaps in [their] knowledge.”
The CETFA adds the paper highlights “the ambiguity that exists under the current regime as to when a fiduciary duty currently applies.”
“Based on the survey results presented in the paper, a large percentage of Canadian investors assume their adviser or dealer already has a fiduciary duty when in fact [they] may not,” reveals the letter.
It adds, “Our hope is the discussion of this issue will eventually result in greater clarity as to when fiduciary duty applies, as well as what adhering to any such fiduciary duty will require.”
Read:
CSA paper highlights the ugly truth
Defining fiduciary duty (2010)
The CETFA does have some reservations, however. It encourages the CSA to conduct additional research that will help decide if the impact of a new standard would be positive for the industry.
It says the impacts on registered portfolio management firms might be minimal, for example, but reminds the CSA any new rules will likely have a larger influence on dealers and their reps.
Read: SEC seriously considers fiduciary rule
In its view, conducting this research before CRM2 has been fully implemented and prior to federal Bill C-28 enactment would also be hasty.
The CETFA says the CSA also has to consider the effects of new point of sale disclosure requirements as well, along with the potential for new IIROC rules based on the responses regulators receive from their “Use of Business Titles and Financial Designations” paper.
“If the best interest standard is implemented, it would [have] need to be clear to investors, regulators and the courts that the duty to act in a client’s best interest shouldn’t mean advisers or dealers have to give perfect advice and services,” warns the CETFA’s letter.
It adds, “Whatever approach ultimately adopted should be consistent across all provinces and territories to allow national firms to have a uniform compliance program, and for investors to have an expectation [of the same] protection regardless of where they reside.”
The CETFA also wants a comprehensive companion policy that would be useful to advisors, dealers and other marketplace participants.
Read: