Advocis Conference Update: Association fleshes out regulatory strategy

(May 12, 2005) Canada’s largest advisor association is adding some key new details in its ongoing campaign to transform the country’s regulatory regime.

In a discussion paper released today at its national conference in Halifax, Advocis expands on its original proposal to separate the regulation of financial advice from securities transactions, suggesting a new, three-pronged approach.

What’s new in the Advocis campaign is a plan to establish Financial Services Councils (FSC) in each province to regulate insurance, mutual fund and securities licencees. Insurance councils in western Canada and the Financial Services Commission of Ontario would become FSCs, Advocis suggests, while new councils would be established in Atlantic Canada.

The councils would be responsible for licensing individuals in each province, but under a single licensing regime. A single multi-category licence will allow new entrants to enter the industry by any category, the discussion paper notes.

Each FSC would also set up its own consumer dispute resolution mechanism (CDRM). “For consumers, the CDRM not only provides a single access point to lodge complaints, but more importantly places the accountability of each complaint with the individual licencee,” Advocis says.

Complaints would be handled by the councils to determine if an offence has been committed and whether disciplinary action is required. Such action could range from a reprimand to licence suspension.

The second part of the Advocis proposal involves the creation of a new professional body for advisors to set standards and codes of conduct. “This body would function in a manner similar to provincial law societies or colleges of physicians and surgeons, although it would be coordinated at a national level, with provincial representation.”

All members of the proposed new professional body would have to hold a valid designation, such as a CFA, CFP or CLU, maintain membership in a professional association, engage in continuing education and carry E&O insurance.

Phase three of the Advocis plans focuses on securities regulation, separating it entirely from the regulation of financial advisors. “Advocis favours the establishment of a single capital market framework for Canada, with the regulation of all securities transactions falling under the authority of a single new entity.”

Under the proposed model (which may require federal involvement to implement, Advocis notes), the new single securities regulator, along with self-regulatory organizations like the IDA and the MFDA, would continue to regulate market participants such as dealers and fund managers, while individual licencees would be regulated by the FSCs.

“Our aim is to build a new model that takes into account all industry participants and creates an effective regulatory regime in the Canadian financial sector,” says Advocis president Steve Howard. “The proposal presents a more responsive and transparent system that establishes effective consumer redress mechanisms and creates a level playing field for financial advisors and intermediaries.”

“Once ratified by our membership, we will present our model to regulators, politicians and other industry participants,” Howard added. “We will seek input and support from all participants in the financial industry in Canada and drive to have this framework implemented.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com