Revised fair dealing principles go national

(November 2, 2004) Several of the key principles outlined in Ontario’s controversial fair dealing model are moving to the national level as part of a larger project aimed at harmonizing the various securities regulation requirements across the country.

But it appears some of the reforms suggested in the initial fair dealing concept paper have been scaled back or eliminated and the fair dealing name could soon be history.

In a departure from tradition, the Canadian Securities Administrators recently set up a joint steering committee, including representatives from regulators in Alberta, B.C., Quebec and Ontario, as well as senior members of the IDA, the MFDA and two industry participants.

“We feel that the joint steering committee approach, although unusual, gives us the best chance of achieving the broad buy-in we need as quickly and efficiently as possible,” says Ontario Securities Commission executive director Charlie Macfarlane, the committee’s chair.

The committee’s broad and ambitious mandate includes harmonizing and streamlining Canada’s regulation and registration regime and creating better transparency between advisors and clients regarding the nature and cost of their relationships, Macfarlane explained on Monday during a panel discussion at the OSC’s annual conference in Toronto.

“It’s my hope that with the major principles in the fair dealing model now embedded in a national CSA project, with both the Street and the self-regulatory organizations involved, I’ll be able to stop defending the [fair dealing] name,” Macfarlane quipped. “The name will go away, but not the principles.”

Key issues for the steering committee — dubbed “Project Charlie” by panelists — include streamlining the myriad of registration categories and information filing requirements across the country, studying the concept of advisor incorporation and examining proficiency and capital requirements.

The IDA’s Paul Bourque says folding parts of the fair dealing model into an overall CSA registration project makes sense, considering that many of the concepts can work only if they are implemented nationally.

“A good deal of the recommendations were positive but we were surprised to find that self-regulatory organizations were not mentioned in the original fair dealing document,” Bourque said.

Bourque agrees there is a need to improve things like account opening procedures and compensation disclosure. But he says some of the fair dealing ideas, such as making investor education the responsibility of the advisor, should be taken off the table.

“Not because it’s not important, but because I don’t think we can assess objectively nor enforce compliance with investor education requirements,” Bourque said.

Still, the fair dealing model’s broad thesis — a shift from transactions to relationships — is “quite profound,” noted OSC commissioner Paul Bates.

“I’m encouraged by the conversations that have taken place over the past few years over where this is going,” said Bates. “If we do our job well, we’ll have an opportunity to influence the nature of information and relationships across the financial services industry.”

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