FAIR Canada
FAIR Canada Newsletter

May 2012

Bricks and Bouquets for Regulators

Bouquets go to the Ontario Securities Commission (OSC) for its focus on investor protection in its draft Statement of Priorities. FAIR Canada is supportive of the new Office of the Investor, and a number of other OSC initiatives such as: the future release of research regarding the client-advisor relationship; studying the cost of owning mutual funds in Canada; working with the Ombudsman for Banking Services and Investments (OBSI) and its CSA colleagues to support an effective informal dispute resolution process for investors; and increasing the robustness of its enforcement activities.

 

In response to its request for comments, we provided suggestions to the OSC about additional issues we would like to see addressed in the final Statement of Priorities. These issues include:

 

  • closer oversight of non-SRO member registrants and mandatory membership in a compensation fund to protect investors from insolvency of a registrant;
  • an examination of leverage, particularly in the sale of mutual funds;
  • substantive regulation of group scholarship plans;
  • appropriate management of conflicts of interest at the TSX; and
  • the need for a single national comprehensive background check that Canadians can easily use to check the background, registration status and disciplinary history of registrants

 

Bricks go to the CSA for letting several years go by without taking any action to address unequal access to SEDAR "public" documents. Paying subscribers to SEDAR are provided with earlier access to "public" information about public companies through SEDAR than the non-subscribing public. This allows large investors with greater resources to have nearly real-time access to public documents while the public does not gain access until the following day. FAIR Canada has serious concerns about this situation. Please click here to read the rest of the story.

 

 

The Investor Advisory Panel's Request for Input on Issues of Importance to Investors

 

FAIR Canada recently submitted comments to the OSC's Investor Advisory Panel in response to its request for comments on a broad range of topics of interest to investors. In its submission, FAIR Canada:

 

  • explains the need for a best interest standard for advisors;
  • discusses annual performance and cost reports, benchmarks, and the point of sale initiative (including Fund Facts)
  • comments on the shortcomings of a securities regulatory framework based solely on formal disclosure documents and the need to also include substantive or merit-based regulation;
  • provides suggestions for improved corporate governance in Canada; and
  • indicates its support for the OSC's Strategic Plan.

 

The Investor Advisory Panel plays a key role in giving Ontario investors stronger representation in the system of securities regulation.

 

 

Incorporation of Individual Registrants Should Not be a Priority and Will Weaken Consumer Protection

 

FAIR Canada has provided its comments to the Provincial/Territorial Council of Ministers of Securities Regulators setting out why the project to permit incorporation of individual registrants of registered dealers and advisers (the "Incorporation Project") should not proceed. It will weaken efforts to protect consumers and will result in a higher risk to the investing public.

  

There are a number of significant investor protection problems within the existing framework of securities regulation that should be a higher priority for governments and regulators than the Incorporation Project. Reforms should focus on improving investor protection rather than changing business structures so as to artificially reduce registrants' tax liability. Allowing individual registrants to incorporate "professional corporations" will contribute to Canadians' misunderstanding of the nature of the client-advisor relationship and will exacerbate the misalignment of obligations and expectations. 

 

 
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