‘Better outcomes’ sought for Canada’s retail investors

Most of Canada’s provincial watchdogs will not introduce a “best interest” standard to raise the bar for how retail investors are treated by their investment advisers, a decision the head of the Canadian Securities Administrators says has been mis-characterized as not looking out for investors.

Louis Morisset, who chairs the umbrella group for provincial regulators as well as for Quebec’s Autorité des marchés financiers, said in an interview that regulators across the country believe “better outcomes” for retail investors should be pursued through higher standards for advisers.

They just don’t all agree that a standard requiring the best interest of the client to be paramount in every investment decision is the way to get there, Morisset said.

“We believe to raise the bar … it’s really by putting in force the package of targeted reforms” proposed last year, which aim to reduce conflicts of interest, govern the use of titles, and beef up an adviser’s knowledge about clients and financial products, he said.

“They will offer much more practical, meaningful, and effective ways to raise those standards.”

All the provinces under the umbrella of the CSA agree on the targeted reforms, while the best interest standard — now endorsed only by regulators in Ontario and New Brunswick — would “create confusion” as well as “legal and regulatory uncertainty,” Morriset said.

In practice, Morisset said, a best interest standard could also let existing conflicts go unchecked because unique industry circumstances — such as dealers that sell only proprietary products — would make a uniform standard impractical.

Despite these concerns, the Ontario Securities Commission is pushing ahead with a best interest standard and will lay out how it sees plan working by next spring, OSC vice-chair Grant Vingoe told the Financial Post this month.