Advisors need to lock down their professionalism in light of yesterday’s ruling from the Supreme Court, says Advocis.
That’s because the court said advisors who work in multiple provinces and violate securities law will live under the threat of prosecution for 12 years.
While 12 years is still a long time, it’s much shorter than what was possible before the ruling: a 74-year threat of litigation if all 13 regulators chose to prosecute an advisor registered coast-to-coast. The normal statute of limitations for securities violations is six years in all provinces except Manitoba, where it’s eight.
(For more background on this issue, read: Supreme Court limits multiple advisor penalties and Regulatory daisy chain threatens advisors.)
This ruling is “another reason for advisors to be working on their professionalism, and putting clients’ interests ahead of their own,” says Ed Skwarek, vice president of regulatory and public affairs for Advocis.
His association intervened in the case on behalf of its members, because “while the appellant wasn’t a financial advisor, we saw the principles behind this case to have profound effects on the securities market,” says Skwarek.
He’s pleased with the outcome.
“The court recognized the business reality that advisors can’t be held accountable for their entire careers,” he says. “While the court did introduce some complexities, I would say this is way better than what we had before.”
Read: Advocis to fight legal precedent
Increasingly, advisors are registered in multiple jurisdictions, thanks in part to certain provincial boundaries being removed, Skwarek says. “This is a bigger problem than people realized.”
He remains concerned about the effective 12-year limitation period mentioned in the SCC ruling.
“I like it when bad actors are caught, but there’s the issue of fairness,” he adds. “We want to be fair to all parties. That line of fairness has been moved back by 62 years. Is it where it should be? I think it should be at six years.”
Skwarek says Advocis will continue to push for the six-year limitation period.
“When we meet with the Ministers of Finance and Justice, it would be something we’d raise as a matter of concern. Even a 12-year period is still a long time in terms of your lifetime in the industry. That’s why you see limitations [normally] being six years,” he says.
Read: OSC got tough in 2011
His advice to advisors? “It’s important to be upgrading [your credentials] and making sure you don’t get into hot water. If you do get into hot water, there’s going to be a price to pay. But as of today, that price isn’t necessarily going to follow you for your entire career — but it could follow you for up to 12 years.”
For its part, the B.C. Securities Commission is “pleased with the Supreme Court’s decision,” says Brenda Leong, chair of the commission. (BCSC was the defendant in the Supreme Court case.) “With current technology, individuals do not have to be present in British Columbia to engage in activities that may be harmful to B.C. investors or our markets, so this decision strengthens interprovincial enforcement and our ability to protect investors in this province.”