Securities commissions should team up on deregulation efforts, Advocis says

(February 25, 2003) Two of Canada’s largest provincial securities regulators should collaborate on a pair of like-minded deregulation initiatives, says Advocis, the country’s largest professional association for financial advisors.

Although the British Columbia Securities Commission’s proposals for new mutual fund regulations and the Ontario Securities Commission’s suggested fair dealing model are separate projects, the similarities between the two may be greater than the differences, says Advocis in a position paper released this month.

“The need for uniform securities regulation across the 13 provincial and territorial jurisdictions of Canada is not only well-known, it is notorious,” says the paper, written by Advocis general counsel Ed Rothberg.

“Advocis is disturbed to observe that the BCSC’s deregulation project and the fair dealing model of the OSC are bold initiatives that appear to be proceeding independently.”

The Fair Dealing Model is focused on the relationship between the client and advisor in the context of advice giving, rather than trade execution, Advocis says. “It requires the advisor and the client to define mutual expectations and obligations in a structured fair dealing document.”

Advocis says the BCSC’s proposed code of conduct for mutual funds appears to reflect several aspects of the OSC’s initiative, including integrity and fairness, know your client principles and conflicts of interest relating to compensation.

The emphasis in both models is the active management of potential conflict through disclosure, Rothberg adds.

The similarities between the two projects are symptomatic of a larger problem, Rothberg says, noting that regulatory systems unique to a single jurisdiction cannot be sustained. “No proposals for reform, no matter how meritorious, will be viable without harmonization,” he says.

The Advocis paper also recommends that the BCSC work with the Joint Forum of Financial Market Regulators to create a national database, comprising all licensed and registered financial intermediaries. The National Registration Database proposed by the Canadian Securities Administrators could serve as a component of a comprehensive national database, Advocis adds.

“That is one reason why Advocis believes that the registration of individual representatives by a securities regulator must continue to operate in parallel with the licensing of individual agents by insurance regulators,” the paper states.

Should the BCSC and OSC come together to discuss their separate initiatives, as Advocis suggests? Share your thoughts about the fair dealing model, BCSC’s proposals for new mutual fund regulation or any other topic concerning your business in the “Free for All” forum of the Talvest Town Hall on Advisor.ca.

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