Consumer services

The movement towards securities regulation spans across Canada

The securities used by financial professionals have historically been subject to minimal regulation and supervision, and the wide variety of securities, credentials and services offered can be confusing for investors and consumers of services. financial. However, momentum is building across Canada to regulate and supervise certain financial professionals and the securities they use. Ontario and Saskatchewan both recently released draft regulations for their pending securities regimes, and New Brunswick has begun a consultation to explore similar legislation.

In May 2019, the Ontario Financial Professionals Title Protection Act (the Ontario Act) received Royal Assent. Ontario law establishes a general prohibition on the use of FA (financial advisor) or FP (financial planner) titles or titles that could reasonably be confused with FA or FP titles, unless the professional has obtained an approved title from an approved certification body. One proposed rule, Rule 2020-001 – Title Protection of Financial Professionals (the Ontario Rule) establishes specific criteria for accreditation bodies and basic profiles for accreditation holders. The program is expected to be overseen by the Financial Services Regulatory Authority of Ontario (ARSF) and subject to rules established by it. No effective date has yet been announced.

In July 2020, Saskatchewan passed the Financial Planners and Financial Advisors Act (the Saskatchewan Act), which is closely modeled on the Ontario Act. The stated purpose of the Saskatchewan Act is to create consistency between Saskatchewan and Ontario (and any other jurisdiction adopting a similar model) and to streamline compliance for accreditation bodies and financial professionals. When the Ontario and Saskatchewan plans come into effect, anyone using the designations of financial planner, financial advisor, or similar designations in either jurisdiction will need to have the appropriate identifying information. ” an accreditation body approved by each regulatory body. Each scheme delegates the primary administration and oversight of FP and FA credentials to approved certification bodies and sets only basic threshold criteria to govern the use of each credential.

In July 2021, the Financial and Consumer Affairs Authority of Saskatchewan (FCAA) issued a notice of proposed regulation and a request for comment. [PDF] under the Saskatchewan Act. Consistent with the overall legislative framework, Saskatchewan’s proposed regulations (the Saskatchewan Regulations) closely mirror the Ontario rule. Saskatchewan regulations and the Ontario rule establish threshold competency profiles for holders of FA and FP credentials and allow individual accrediting bodies to meet or exceed the threshold established by the regulatory regime. In addition, each plan requires that holders of FA and FP credentials meet minimum criteria relating to financial services knowledge, ethics, client performance and technical knowledge.

While the proposed regulations in the Ontario and Saskatchewan plans are very similar, the Saskatchewan regulations differ significantly from the Ontario rule. Under the regime proposed in Saskatchewan, for example, accreditation bodies are required to require FP and FA accreditation holders to a minimum standard of treatment of clients, including:[ing] material conflicts in the best interests of their clients ”and“ put[ting] customer interests first when determining suitability.

In its notice of draft rule and request for comment, the FCAA observed that “some parties have indicated a preference for a higher minimum standard to be applied to persons who use the FP or FA credentials.” This concern had been addressed by explicitly incorporating the proposed client-centric reforms led by Canadian securities regulators and the guidelines on the conduct of insurance business and the fair treatment of clients adopted by regulators. insurance.

This contrasts with the Ontario rule, which mandates accreditation bodies to ensure that FPs and MAs “deal with [credential holder’s] clients with competence, professionalism, fairness, honesty and good faith ”and meet certain key conflict of interest educational requirements. The Ontario Rule does not prescribe a best interests standard – or specific standard – for the management of conflict with clients and does not require FAs or PFs to make determinations of convenience in accordance with regarding financial advice.

If the Saskatchewan proposed regulations come into effect, the FA and MF accrediting bodies will be required to ensure that credential holders in that jurisdiction are governed by the minimum conflict and adequacy requirements. . Accrediting bodies will therefore either need to institute stricter rules for FAs and MFs in Saskatchewan and accept any resulting interjurisdictional inconsistencies among their members, or implement generalized cap requirements in all jurisdictions to accommodate. more stringent Saskatchewan requirements.

Meanwhile, Ontario’s title regime continues to move forward following a second public consultation in which FSRA sought stakeholder input on proposed transition periods over short for users of existing FP and FA titles, additional requirements to provide the CEO of ARSF with the information necessary to establish a consolidated register of title holders, and a proposed pricing structure. The stated objectives of the ARSF in the implementation of a tariff structure would be to allow the recovery of the costs incurred to design and implement the framework, to allow the recovery of permanent regulatory costs for the surveillance of the FP / FA sector, and not impose an undue burden on individual title holders and accreditation bodies.

Following the lead of Ontario and Saskatchewan, the New Brunswick Financial and Consumer Services Commission (FCNB) concluded its own public consultation [PDF] on a framework for the protection of securities used by financial professionals on October 25. In its public consultation notice, FCNB indicated that it was considering recommending the passage of a professional financial credential law similar to the plans in Ontario and Saskatchewan. The public consultation notice therefore invited public comment on the differences between the Ontario and Saskatchewan regimes, including the differences between the proposed penalties and the enforcement provisions – Saskatchewan legislation, for example. , contemplates fines and offenses for violators of title requirements, while title Ontario law only contemplates enforcement orders against title violators.

The public comment notice also noted that Saskatchewan law has adopted a streamlined approval process for accreditation bodies already approved in other jurisdictions, while Ontario law will require all applicants accreditation bodies go through the entire approval process. The consultation period ended on October 25.

It is not known when these regimes will eventually become operational, but the trend towards formalizing consistent supervision of users of securities is apparent. Industry stakeholders, including consumers and investors, should closely monitor future developments as the Ontario and Saskatchewan plans approach finalization and New Brunswick pursues its own legislative approach and similar regulatory. As these frameworks approach implementation, other provinces and territories may begin to adopt their own measures to regulate the use of FA and FP credentials.

This article was originally published by The Lawyer Daily (www.thelawyersdaily.ca), which is part of LexisNexis Canada Inc.

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