New rules for advisers, clients fall short: critics

TORONTO Canadian regulators are rolling out new national standards governing the relationship between clients and financial advisers — including how conflicts of interest are handled. But the changes, which stop short of imposing a fiduciary or universal “best interest” standard, come as a disappointment to some investor advocates.

The standards for financial advisers, which will introduce new obligations and codify “best practices” governing the suitability of investments and disclosure, will be phased in over two years, beginning in December.

Obligations for handling conflicts of interest deemed “material” will come first, along with relationship disclosure, and will be fully in pace by the end of 2020.

Advisers “will be required to address material conflicts of interest in the best interest of their clients and put clients’ interest first when determining the suitability of investments,” the Canadian Securities Administrators said in a statement Thursday.

“Taken together, these changes mean better protection for retail investors across Canada, and a high and uniform standard of conduct for all registrants,” said Louis Morisset, chair of the CSA, an umbrella organization for the country’s 13 provincial and territorial securities commissions.

The “targeted” reforms are the product of a multi-year consultation that saw regulators in Ontario and New Brunswick push for an overarching, across-the-board best interest standard for all investment advisers, something that was never embraced by the CSA.

Under such a regime, a client’s best interests would have to be paramount in all decisions, similar to the duty of care and conduct adopted in jurisdictions such as Australia and the United Kingdom.

Adviser obligations in Canada’s current system require only that clients are dealt with fairly, honestly and in good faith, and that investment recommendations are “suitable.”

Ken Kivenko, an investor advocate, described the changes coming into force in December as “no more than a touch up” to existing practices.

“This might be called suitability with a tiny plus,” Kivenko said.

He added that he saw “little of substance, in terms of positive change.”