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The CSA tighten the screw to reduce the conflicts of interest


Andrea Lubeck

June 22, 2018 09:45

Photo : Freepik

The canadian securities administrators (“CSA”) wish to eliminate the deferred sales charge and trailing commissions to the discount brokers have announced on the occasion of the publication of their notice 81-330, the point on the consultation on the commissions built-in and next steps. The notice follows the consultation document 81-408 on the abandonment of the commissions as part of published in January 2017.

Thus, the regulators emphasize that the abandonment of deferred acquisition costs and trailing commissions to the brokers and all those who do not evaluation of the suitability of the proposed product will ” eliminate the problematic practices and the harms suffered by the investors “, to reduce conflicts of interest and ensure a better match between the costs charged and the services provided.

Firms to manage conflicts of interest

Moreover, the document suggests to oblige the undertakings for collective investment and their representatives “to deal with all the conflicts of interest existing and reasonably predictable in the best interests of the customer,” in addition to record conflicts of interest identified and how they were treated.

The firms could also be required to demonstrate that the composition of their product range and the recommendations are ” based on the quality of securities and not on the compensation offered by a third party in respect of such securities “.

The authorities plan to make the suitability obligation to the client a fundamental obligation, to request more accurate information on the customers, to establishing a requirement of knowledge of the product and that a company make public any information that a potential customer would consider it important in deciding whether it wishes to deal with it.

Addressing conflicts of interest

The regulators explained that their proposed amendment to national instrument 31-103 registration requirements and exemptions and ongoing registrant obligations registrants is intended to address conflicts of interest and in the best interests of clients, to give precedence to the latter in the assessment of the suitability to the latter and try to clarify what clients should expect from those listed.

“These projects offer key changes that put the interests of the customer at the heart of the relationship client-a person registered, supports Louis Morisset, president of the CSA and president and ceo of theAutorité des marchés financiers. The reforms enhance the core obligations of registrants to their clients and are necessary for the protection of investors. “

A new consultation in September

The CSA have announced that they will release a notice of consultation in September in order to examine the impact of the regulation on the benefits and impact potential of the proposed regulatory amendments on investors. These proposed changes include the elimination of acquisition costs deferred and the trailing commissions paid to brokers who perform no assessment of the suitability and transitional measures.

“This notice will give the stakeholders a new opportunity to make a significant contribution to the consultations. After its publication, the authorities as members of authorities may hold in-person consultations to discuss proposed regulatory amendments “, add the regulators.

Over a hundred people heard

The consultation, a duration of 150 days, was reacted with 142 employees and agencies that have produced memories. Of this number, 84 % of the submissions came from stakeholders in the sector, and the rest of the interested parties, such as investors and groups of investors.

The consultation aimed to examine the issues related to conflicts of interest that give rise to the commissions integrated and the level of misunderstanding that they bring, in particular.

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