TORONTO — Several provincial securities regulators across Canada have expressed concerns about introducing a mandatory “best interest standard” for financial advisers that they say will create uncertainty.
A report by the Canadian Securities Administrators says that while the Ontario Securities Commission and New Brunswick’s Financial and Consumer Services Commission strongly support the proposed change, regulators in Alberta, B.C., Quebec and Manitoba believe it would not be beneficial.
Quebec’s securities commission believes the proposed best interest standard will create legal uncertainty.
“It does not create a clear standard for registrants to follow or for regulators to enforce,” said Autorite des marches financiers spokesman Sylvain Theberge.
“Clients may expect that all registrants have an unqualified duty to act in their best interests, not understanding that some conflicts would still be permitted.”
Meanwhile, Alison Trollope, director of communications for the Alberta Securities Commission, called the proposed best interest standard ”vague” and “ambiguous,” adding that it “may trigger unintended consequences.”
“We want advisers to act in the best interest of their clients,” Trollope said. “However, we believe that the better route to achieve this is to enhance the existing standards to focus on the areas of greatest concern.”
The CSA report notes that regulators in Nova Scotia and Saskatchewan have also expressed concerns, but are open to further consideration of a best interest standard provided substantial revisions are made to add clarity and predictability.
The CSA says the best interest standard would act as an overarching standard guiding advisers to avoid or control conflicts of interest by putting a client’s interests first. It would also require advisers to provide full, clear, meaningful and timely disclosure to their clients.
While the proposed standard would raise the bar from the current “suitability standard” requiring advisers to deal fairly, honestly and in good faith with clients, the CSA said it is not intended to be a legal fiduciary duty.
However, the OSC said the system in place today merely requires advisers recommend products that are “suitable” for a client at the point of sale based on certain information clients provide, such as their risk tolerance and goals.
“We have been clear all along that we support a best interest standard and are prepared to demonstrate leadership here,” said OSC vice-chair Grant Vingoe.
“This is about doing the right thing — and fulfilling one of our greatest responsibilities as a regulator: delivering effective investor protection to the public we serve.”
The CSA’s report follows a consultation paper it launched in April 2016 on the proposed best interest standard, including targeted reforms regarding conflicts of interest, advisers’ know-your-client and know-your-product obligations, as well as the myriad of adviser titles and designations that confuse consumers.