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FAIR Canada Newsletter
February 2012
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FAIR Canada Releases its Accountability Report
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 On behalf of the Board of Directors of FAIR Canada, I am pleased to present FAIR Canada's first Accountability Report. This Report covers our first three and a half years as a non-profit, independent, national organization mandated to represent the interests of Canadian investors in securities regulation.
The Report describes what we have accomplished since our launch in mid-2008 through to December 2011. It provides information about our governance, mandate, strategic priorities, and our accountability to our funders and the public.
In a relatively short period of time, FAIR Canada has become a nationally recognized voice for investors in securities regulation. We have helped to achieve certain milestones in the investor protection area, including:
- Improved investor representation in securities regulation, including highlighting the need for securities regulators to set up investor advisory panels
- Led the discussion in Canada about the need to introduce a fiduciary duty/best interest standard for financial service providers
- Increased awareness of the dangers posed to investors by complex investment products - influenced regulatory action on leveraged, inverse and commodity ETFs
- Led the debate in Canada over the conflict of interests of Canada's major stock exchanges in listed company regulation, which has come into greater focus with the emerging market listings crisis
FAIR Canada does not have the power to make decisions or to implement changes in securities regulation. At the end of the day, it is up to regulators, government and industry to effect change in order to better protect investors. We have observed increased receptiveness to ideas from the investor perspective and more focus on investor protection from regulators (including SROs) and governments since we began advocating for investors. We find this trend very encouraging. We are hopeful that it will continue, particularly at a time when product complexity is on the rise and greater financial responsibility is being placed on the shoulders of ordinary Canadians.
We are continually working on improving our transparency, accountability and effectiveness. To that end, we welcome feedback from all of our stakeholders.
Sincerely,
Ermanno Pascutto
Executive Director, FAIR Canada
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OBSI's Update
OBSI's recent newsletter provides an update on governance reform, its investment suitability complaints methodology and its so-called 'stuck' cases (see newsletter for details on the update).
OBSI's Consumer and Investor Advisory Council disagreed with the idea of a third party review of the stuck cases, stating that this would undermine OBSI's role and independence. Its position can be found here.
Ellen Roseman published her opinion that the federal government should step in and show leadership by ensuring that the banks and investment dealers cannot defect from OBSI and refuse to resolve the complaints that are at an impasse. FAIR Canada commented: "Would you rather have your banking or investment complaint reviewed by a firm hired by your bank or broker or by an independent ombudsman? Only one of these two options is fair to consumers and it is not the option preferred by some of the large banks and investment dealers. This should be an easy call for Finance Minister Flaherty...".
OBSI recently released its 2011 Annual Report, in which OBSI addresses "head on" industry's attack against it. OBSI's Chair, Peggy-Anne Brown warns that OBSI's very survival is at stake and that support from government and regulators is absolutely essential at this time. She notes that "[i]n the absence of sufficient industry cooperation and support, government and regulators must step in, as they have clearly done for the investment sector, to support a fair, independent and impartial reviewer of bank complaints. If there is not sufficient support for OBSI from government and banking regulators, a return to the original plan, that of a statutory dispute resolution scheme, may be preferable".
The Annual Report also discloses the first instance of a banking sector firm refusing OBSI's recommendation to improve practices and provide consumer compensation, where OBSI determined that there were systemic issues at play. OBSI's Terms of Reference require that it report the refusal to the firms's regulators and publish the refusal on a no-names basis.
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FAIR Canada encourages Canadians to check out www.smartsaver.org for useful tips and information about how to start a Registered Education Savings Plan (RESP) and obtain government money for their children's post-secondary education. The SmartSAVER website provides clear, unbiased information about RESPs in 16 different languages. It gives Canadians tools and links to useful information, including:
- an easy-to-follow chart comparing RESPs at ten different financial institutions,
- a short video that introduces consumers to RESPs, and
- personal stories about how families are using RESPs and government grants to help their children achieve their educational goals.
The website compiles information put together by SmartSAVER, a non-profit community project, sponsored by the Government of Canada and the OMEGA Foundation, with assistance from foundations, community partners and RESP providers.
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FAIR Canada Supports IIROC Membership Disclosure Requirements
FAIR Canada supports IIROC's introduction of an obligation for Dealer Members to disclose their membership in IIROC. These efforts to promote and raise awareness of IIROC and its regulatory function, and to help investors determine whether the firm and/or registrant is an IIROC member or not, are of benefit to Canadian investors. FAIR Canada is also supportive of the requirement to distribute the current version of the IIROC Official Brochure to (1) new clients at the time of account opening; and (2) existing clients, upon request. However, we suggested that in order to further the objectives of the Proposals, the brochure should be sent to all existing clients once the Proposals are adopted.
MFDA Public Directors Should Represent the Public Interest FAIR Canada provided comments to the MFDA noting that the MFDA's definition of Public Director should not be significantly broadened, and that the current definition properly restricts persons associated with, involved in or representing the interests of the investment industry rather than the public interest. FAIR Canada urges the MFDA to increase its efforts in finding individuals who can serve as Public Directors, and, in particular, in finding individuals who could bring an investor perspective. In the letter, FAIR Canada also supports an evergreen list of potential candidates, as was recommended by staff of the British Columbia Securities Commission and contained in the CSA's Corporate Governance Review of the MFDA. FAIR Canada does not believe that allowing currently disqualified individuals to act as Public Directors will further the MFDA's public interest mandate, enhance the reputation of the MFDA, or increase stakeholder confidence in the Board's ability to discharge its oversight responsibilities.
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