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FAIR Canada Launches Ambitious Funding Campaign
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FAIR Canada's Board of Directors is pleased to announce that the organization is embarking on an ambitious campaign to raise long-term funding.
Buoyed by a generous $2 million donation from the Jarislowsky Foundation, founded by Stephen Jarislowsky, a long-standing director, the organization plans to raise capital to be contributed to an endowment fund to provide funding for the organization on an ongoing basis in addition to raising ongoing operational funding.
"FAIR Canada has been a voice for investors for over five years and has developed an impressive track record. We have a reputation for being a credible, independent, well-reasoned and sophisticated investor representative. And with secure funding, we can ensure that FAIR will continue to focus on its important work," said board chair Ellen Roseman.
FAIR Canada is a unique, national, charitable organization that works with regulators, governments, industry, and the investor community to raise the standards in Canadian capital markets.
Mr. Jarislowsky believes that FAIR Canada's work is of such critical importance to Canada's economic well-being that he made this leadership donation and is urging leaders in the financial industry and business community to follow his example. FAIR Canada invites visionary leaders in the investment and financial industries to support our efforts to permanently raise the standards and performance of Canada's investment industry. Small donations may be made using the 'donate now' button on our website, or you can donate directly on CanadaHelps.org. Please contact Neil Gross directly for larger donations at neil.gross@faircanada.ca.
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Standards Needed for Risk Tolerance Assessments
Risk-tolerance assessment is a critical part of the know-your-client (KYC) process, yet surprisingly in Canada and most other jurisdictions, there are no standards in place for how a risk-tolerance assessment is to be conducted. This has created a gap that needs to be addressed without delay; not just to protect investors, but also to assist investment professionals in discharging their duties.
Currently, dealers and individual advisors employ widely varying practices for assessing risk tolerance. Many simply perform vague and highly subjective evaluations based solely on the advisor's "feel" after discussions with the client. Others rely on "scores" derived from answers to written questionnaires that assign numerical values to the responses and map the resulting tallies to asset allocations or model portfolios.
This story originally appeared as an Inside track op-ed in the online version of Investment Executive. To read the rest of the article on our website, click here.
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How Much Borrowing For Investment Purposes Is There?
As noted by James Langton of Investment Executive, not only are Canadians' household debt levels rising, so is their borrowing for the purposes of investing. Data from IIROC shows that monthly client margin debt is $17.18 billion as of January 31, 2014 (and was $16.4 billion as of December 31, 2013). This surpasses the previous high of $16.3 recorded as of July 31, 2008, immediately prior to the financial crisis. This amount of debt comprises the "on-book" debt at IIROC. It would be interesting to know the amount of "off-book" debt Canadians have incurred for investing purposes.
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Short-Term Debt Prospectus Exemption and Proposed Securitized Products Amendments
FAIR Canada has provided comments to the CSA on its proposed amendments to the short-term debt prospectus exemption and the proposed securitized products amendments.
FAIR Canada continues to stress that the assumption upon which wealthy or high-income investors are sold exempt market products - namely that they are sophisticated and do not need the disclosure the securities regulatory regime would otherwise provide - is flawed. Wealth is not a valid or sufficient proxy for sophistication.
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FAIR Canada Comments on IIROC's CRM2 Amendments
FAIR Canada has submitted comments on IIROC's proposed amendments to its rules to implement the CRM2 Amendments which will provide for pre-trade disclosure of charges and annual reporting of performance and costs and fees incurred, including the amount of payments received by third parties (such as trailing commissions). FAIR Canada recommends that the CRM2 rules be substantively and substantially the same as the CSA CRM2 amendments so that all firms, regardless of whether they are a member of IIROC, a member of the MFDA or are directly supervised by a CSA member are subject to the same requirements so that consumers can meaningfully compare the reports they may receive from different firms irrespective of which regulator directly oversees each firm, to the greatest extent possible.
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New SIPA Website
The Small Investor Protection Association (SIPA) has launched a redesigned website which provides information about the organization, its priorities, and its activities. SIPA's March 2014 newsletter rightly points out that leveraged investing (borrowing to invest) is only for sophisticated investors who can afford the risk of substantial loss. SIPA recommends that small investors do not used borrowed money for investing.
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IIROC Guidance re Business Titles and Designations
IIROC has issued a Guidance Note to suggest best practices that Dealer Members may adopt to help ensure that firms are able to properly supervise the business titles and financial designations being used by the licensed representatives when dealing with consumers. Individuals are not to hold out in a way that deceives or misleads a client or other person as to the IIORC approval they hold, their proficiency or qualifications in order to comply with the obligation to deal fairly, honestly and in good faith with clients".
Firms are to have policies and procedures which promote greater transparency for consumers, particularly for those who are vulnerable and less sophisticated. Business titles must take into consideration (i) the role and function that the individual is approved by IIROC to undertake; (ii) the services and/or products they can sell or advice on; (iii) the qualifications of the individual (including experience and education) and (iv) the actual role, function and office held by the individual. Business titles should be coupled with public disclosure and a plain language explanation of the individual's IIORC approval category, corresponding proficiencies and that IIROC is the licensing body.
Read more...
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FAIR Canada is a national, charitable organization dedicated to putting investors first.
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