Regulatory reckoning: Dealing with a

(October 22, 2003) It’s been a heady time for proponents of securities regulation reform, with several major projects due by the end of the year. Yesterday, Advisor.ca tackled the wise persons committee and the uniform securities legislation project, with help from four industry leaders. Today, we conclude our series with a look at two other […]

By Doug Watt | October 22, 2003 | Last updated on October 22, 2003
4 min read
  • Regulatory reckoning: Dealing with a “tidal wave” of reforms (part 1 of 2)
  • CSA restructures, sets up Montreal office
  • Regulatory competition counterweight to securities industry concentration, Quebec study argues
  • National securities regulator would save $40 million a year, study says
  • Ontario regulator proposes three distinct advisor-client relationship models

    There are other regulatory proposals further down the horizon, including the British Columbia Securities Commission’s B.C. Model, an attempt to streamline and simplify securities laws. The draft legislation, released earlier this year, suggests replacing detailed rules with a principles-based code of conduct for advisors. Barber likes B.C.’s approach, but Stromberg is less supportive, calling it a “needless exercise.”

    “I think it will make it more difficult and more costly if each firm and individual is left to devise their own rules and make sure they fit within the principles. The conditions of registration that exist now are pretty pragmatic. To wipe out the years of work that those conditions reflect seems to me to be a huge step backward and not in the interest of either the industry or the investing public,” Stromberg says.

    Of course, there’s no guarantee that any of the regulatory initiatives we’ve looked at will affect your business anytime soon. Barber notes there’s often a lengthy lag before any type of reform is actually implemented. “Even then, not all of the recommendations go forward because there may not be the political will or momentum to get it done,” he says.

    And for the average advisor, changes in regulation likely won’t mean big changes in their day-to-day lives. “For most advisors, it doesn’t matter because they’re operating in a narrow environment and they’re very pragmatic about it, they structure their operation within the framework of the rules,” says Stromberg.

    Still, Barber says the only way to survive in this industry is to embrace change. Howard agrees. “You’ve got self-serving perpetuation from a wide array of associations and a wide array of regulators. But when you get above it all, it ain’t working, it’s not promoting market efficiency and it’s crippling to us internationally as well as nationally. We have to get out of this box.”

    • • •

    Part one of our regulatory feature focused on the wise persons committee and uniform securities legislation project. Please click here to read the article.

    • • •

    What do you think of the various regulatory initiatives? What difference, if any, will the proposed reforms mean to your business? Share your thoughts in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

    (10/22/03)

    Doug Watt

    • (October 22, 2003) It’s been a heady time for proponents of securities regulation reform, with several major projects due by the end of the year. Yesterday, Advisor.ca tackled the wise persons committee and the uniform securities legislation project, with help from four industry leaders. Today, we conclude our series with a look at two other initiatives.

    Provincial ministers’ steering committee: The provinces (Alberta, Manitoba, British Columbia, Saskatchewan, Ontario and Quebec) responded quickly to the creation of the wise persons committee with their own project, which has so far focused exclusively on a “passport” system, allowing advisors approved in one jurisdiction to easily register in another province. Details are expected to be announced later this fall.

    IFIC vice-president John Murray: “If the provincial ministers get their passport initiative through, that has the potential to reduce costs significantly because dealers won’t have to comply with the cost of multiple jurisdictions.”

    Securities lawyer Glorianne Stromberg: “It seems we might be faced with a missed opportunity. The public announcements that have come out with the provincial ministers’ committee were a pre-determination that they would adopt a passport system. In theory, we’ve had that for the last five years and it hasn’t worked. So I don’t know what the ministers are going to come up with that’s going to get over that very major impediment.”

    Fair dealing model: Introduced by the Ontario Securities Commission (OSC) last year, fair dealing is an attempt to clearly define the relationship between advisors and their clients. It envisions three different models: the traditional advisory relationship, where advisors and clients share responsibility for investment decisions, the “managed for you” relationship, where investors surrender control of their accounts to the advisor, and the self-managed or do-it-yourself approach, where investors take responsibility for all trades. A draft version of the model is due sometime this fall.

    Advocis president Steve Howard: “The premise of the fair dealing model is absolutely correct — it’s based on the importance of advice-giving so it’s welcome and appropriate, but it’s flawed in our view. It should never be administered by the OSC it should be administered by professional associations. It’s time for the fair dealing model but it’s not time for the OSC to do it.”

    Independent Financial Brokers of Canada (IFB) president David Barber: “We see fair dealing as the most destructive piece of rulemaking that’s ever come out of the OSC. We see it as the end of the insurance industry, because it does not deal with insurance as a product. It contemplates someone walking into a retail office and buying financial products. Insurance doesn’t work that way. Nobody calls me to buy insurance. I have to come to you. It must not apply to us and the IFB will fight to ensure it doesn’t.”

    Murray: “It’s going to require changes to the current proficiency requirements, which means advisors will have to take new courses or write an exam. And because the whole thing is based on a fair dealing document that has to be updated periodically between transactions, that’s a new type of paperwork so there’s more overhead and costs and legal fees.”

    Related News Stories
  • Regulatory reckoning: Dealing with a “tidal wave” of reforms (part 1 of 2)
  • CSA restructures, sets up Montreal office
  • Regulatory competition counterweight to securities industry concentration, Quebec study argues
  • National securities regulator would save $40 million a year, study says
  • Ontario regulator proposes three distinct advisor-client relationship models

    • There are other regulatory proposals further down the horizon, including the British Columbia Securities Commission’s B.C. Model, an attempt to streamline and simplify securities laws. The draft legislation, released earlier this year, suggests replacing detailed rules with a principles-based code of conduct for advisors. Barber likes B.C.’s approach, but Stromberg is less supportive, calling it a “needless exercise.”

    “I think it will make it more difficult and more costly if each firm and individual is left to devise their own rules and make sure they fit within the principles. The conditions of registration that exist now are pretty pragmatic. To wipe out the years of work that those conditions reflect seems to me to be a huge step backward and not in the interest of either the industry or the investing public,” Stromberg says.

    Of course, there’s no guarantee that any of the regulatory initiatives we’ve looked at will affect your business anytime soon. Barber notes there’s often a lengthy lag before any type of reform is actually implemented. “Even then, not all of the recommendations go forward because there may not be the political will or momentum to get it done,” he says.

    And for the average advisor, changes in regulation likely won’t mean big changes in their day-to-day lives. “For most advisors, it doesn’t matter because they’re operating in a narrow environment and they’re very pragmatic about it, they structure their operation within the framework of the rules,” says Stromberg.

    Still, Barber says the only way to survive in this industry is to embrace change. Howard agrees. “You’ve got self-serving perpetuation from a wide array of associations and a wide array of regulators. But when you get above it all, it ain’t working, it’s not promoting market efficiency and it’s crippling to us internationally as well as nationally. We have to get out of this box.”

    • • •

    Part one of our regulatory feature focused on the wise persons committee and uniform securities legislation project. Please click here to read the article.

    • • •

    What do you think of the various regulatory initiatives? What difference, if any, will the proposed reforms mean to your business? Share your thoughts in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

    (10/22/03)

    (October 22, 2003) It’s been a heady time for proponents of securities regulation reform, with several major projects due by the end of the year. Yesterday, Advisor.ca tackled the wise persons committee and the uniform securities legislation project, with help from four industry leaders. Today, we conclude our series with a look at two other initiatives.

    Provincial ministers’ steering committee: The provinces (Alberta, Manitoba, British Columbia, Saskatchewan, Ontario and Quebec) responded quickly to the creation of the wise persons committee with their own project, which has so far focused exclusively on a “passport” system, allowing advisors approved in one jurisdiction to easily register in another province. Details are expected to be announced later this fall.

    IFIC vice-president John Murray: “If the provincial ministers get their passport initiative through, that has the potential to reduce costs significantly because dealers won’t have to comply with the cost of multiple jurisdictions.”

    Securities lawyer Glorianne Stromberg: “It seems we might be faced with a missed opportunity. The public announcements that have come out with the provincial ministers’ committee were a pre-determination that they would adopt a passport system. In theory, we’ve had that for the last five years and it hasn’t worked. So I don’t know what the ministers are going to come up with that’s going to get over that very major impediment.”

    Fair dealing model: Introduced by the Ontario Securities Commission (OSC) last year, fair dealing is an attempt to clearly define the relationship between advisors and their clients. It envisions three different models: the traditional advisory relationship, where advisors and clients share responsibility for investment decisions, the “managed for you” relationship, where investors surrender control of their accounts to the advisor, and the self-managed or do-it-yourself approach, where investors take responsibility for all trades. A draft version of the model is due sometime this fall.

    Advocis president Steve Howard: “The premise of the fair dealing model is absolutely correct — it’s based on the importance of advice-giving so it’s welcome and appropriate, but it’s flawed in our view. It should never be administered by the OSC it should be administered by professional associations. It’s time for the fair dealing model but it’s not time for the OSC to do it.”

    Independent Financial Brokers of Canada (IFB) president David Barber: “We see fair dealing as the most destructive piece of rulemaking that’s ever come out of the OSC. We see it as the end of the insurance industry, because it does not deal with insurance as a product. It contemplates someone walking into a retail office and buying financial products. Insurance doesn’t work that way. Nobody calls me to buy insurance. I have to come to you. It must not apply to us and the IFB will fight to ensure it doesn’t.”

    Murray: “It’s going to require changes to the current proficiency requirements, which means advisors will have to take new courses or write an exam. And because the whole thing is based on a fair dealing document that has to be updated periodically between transactions, that’s a new type of paperwork so there’s more overhead and costs and legal fees.”

    Related News Stories
  • Regulatory reckoning: Dealing with a “tidal wave” of reforms (part 1 of 2)
  • CSA restructures, sets up Montreal office
  • Regulatory competition counterweight to securities industry concentration, Quebec study argues
  • National securities regulator would save $40 million a year, study says
  • Ontario regulator proposes three distinct advisor-client relationship models

    • There are other regulatory proposals further down the horizon, including the British Columbia Securities Commission’s B.C. Model, an attempt to streamline and simplify securities laws. The draft legislation, released earlier this year, suggests replacing detailed rules with a principles-based code of conduct for advisors. Barber likes B.C.’s approach, but Stromberg is less supportive, calling it a “needless exercise.”

    “I think it will make it more difficult and more costly if each firm and individual is left to devise their own rules and make sure they fit within the principles. The conditions of registration that exist now are pretty pragmatic. To wipe out the years of work that those conditions reflect seems to me to be a huge step backward and not in the interest of either the industry or the investing public,” Stromberg says.

    Of course, there’s no guarantee that any of the regulatory initiatives we’ve looked at will affect your business anytime soon. Barber notes there’s often a lengthy lag before any type of reform is actually implemented. “Even then, not all of the recommendations go forward because there may not be the political will or momentum to get it done,” he says.

    And for the average advisor, changes in regulation likely won’t mean big changes in their day-to-day lives. “For most advisors, it doesn’t matter because they’re operating in a narrow environment and they’re very pragmatic about it, they structure their operation within the framework of the rules,” says Stromberg.

    Still, Barber says the only way to survive in this industry is to embrace change. Howard agrees. “You’ve got self-serving perpetuation from a wide array of associations and a wide array of regulators. But when you get above it all, it ain’t working, it’s not promoting market efficiency and it’s crippling to us internationally as well as nationally. We have to get out of this box.”

    • • •

    Part one of our regulatory feature focused on the wise persons committee and uniform securities legislation project. Please click here to read the article.

    • • •

    What do you think of the various regulatory initiatives? What difference, if any, will the proposed reforms mean to your business? Share your thoughts in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

    Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

    (10/22/03)