The Canadian Securities Administrators (CSA) have reaffirmed their commitment to ban ancillary fees for discount brokers, standardize disclosures for mutual funds and segregated funds, and strengthen the powers of the Ombudsman for Banking Services and Investments (OBSI).
In a progress report detailing CSA’s efforts to achieve the goals set out in its latest business plan (2019-2022), regulators reiterated their commitment to introduce measures to eliminate trailers for discount brokers who simply fulfill orders and they do not provide advice.
The report indicated that regulators are preparing final rule changes to eliminate trailer payments to discount brokers – a practice that is currently the subject of several ongoing class action lawsuits against industry companies.
The decision to end funding for companies that pay trailers to brokers who do not provide advisory services follows a long-running CSA project to reform fund fee structures, which also resulted in provincial regulators (except Ontario) moving to ban deferred fees sales (DSC).
The DSC ban is scheduled to take effect everywhere except Ontario on June 1, 2022. The Ontario Securities Commission is currently consulting on a number of restrictions on the use of DSCs rather than an outright ban.
The entire CSA is also consulted on proposed measures to address the risk of financial exploitation of seniors and other vulnerable investors. These proposals would increase companies’ ability to temporarily block customer accounts due to suspected abuse and would require companies to ask customers to name a “trusted contact.”
The CSA has reaffirmed its intention to strengthen OBSI, its industrial dispute resolution service.
Investor advocates and the independent review have long called for OBSI to be given binding powers, allowing it to require companies to pay compensation to investors who have suffered harm. Currently, it can only make recommendations and has no power to enforce its decisions.
The CSA has not yet committed to giving OBSI binding powers, but has repeatedly committed to “strengthening” its powers.
Among many other initiatives, CSA noted its collaboration with the Canadian Council of Insurance Regulators (CCIR) on a project to standardize cost and performance disclosures provided by both mutual funds (such as mutual funds and ETFs) and segregated funds.
The CSA also committed to continuing efforts to reduce unnecessary regulatory costs through reforms aimed at reducing the compliance burden on registered companies, investment funds and issuers alike.
Other ongoing projects include CSA’s recently launched self-regulatory review, continued derivatives market reform, research into activist short selling, and efforts to develop a regulatory framework for cryptocurrency trading platforms.
The report also indicated that CSA is in discussions with the RCMP’s Integrated Market Enforcement Team to improve coordination in white collar securities crime cases.
“Faced with the challenges posed by the Covid-19 pandemic, our members responded quickly and in a harmonized manner, supporting both investors and market participants. Despite such unprecedented events, we have managed to maintain the course we set out in our business plan for 2019-2022,” said Louis Morisset, Chairman of the CSA and President and CEO of the Autorité des marchés financiers (AMF).
