Significant disagreement remains over whether to impose best interest standard

December 18, 2013

The Canadian Securities Administrators yesterday released a status report to update stakeholders on the consultation process undertaken last year to consider the feasibility of imposing a fiduciary duty on advisers and dealers to act in the best interests of clients.

As we discussed last year, the CSA published Consultation Paper 33-403 on the subject in October 2012, with comments accepted until February 2013. Subsequent to the comment period, the Ontario Securities Commission hosted two roundtable discussions on the subject in June, as well as a panel discussion in July.

Ultimately, the report outlines four primary themes identified through the consultation process, namely that (i) there is significant disagreement in regards to whether current adviser and dealer regulations adequately protect investors and what regulatory response is required; (ii) there is broad agreement that a best interest standard, if adopted, should be as clear as possible and include sufficient guidance for advisers and dealers; (iii) the potential negative impact of such a standard, including with respect to, for example, increased costs, legal uncertainty and negative impact on choice, access and affordability, must be carefully assessed; and (iv) more work is needed before moving forward with a statutory best interest standard or other regulatory response.

The CSA also noted that a number of key messages from stakeholders are similar to those emerging from the current mutual fund fees consultation process, and that a connection between the two initiatives suggests a need for CSA staff to coordinate policy considerations on the two projects going forward. The CSA intend to continue their consideration of the information gathered through the consultation process and anticipate communicating next steps in the coming months. For more information, see CSA Staff Notice 33-316.

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