Doug Sarro, CFA 
Chair

Canadian Advocacy Council

When regulators propose new rules, we can expect industry players closest to the rulemaking to pay attention and comment—after all, they have a significant economic stake in the outcome of that rulemaking. But getting other stakeholders involved is a taller order. They may not be as close to the relevant issues, and may not have the incentive to study up and contribute informed comments.

One way regulators can try and mitigate this imbalance is by explaining in plain language what motivates their new rule proposals and how different stakeholders likely will be affected. We made this point to the Canadian Investment Regulatory Organization this past month, when commenting on their consultation paper “Leveling the Advisor Compensation Playing Field.”

The paper highlights an inconsistency in how securities dealers’ personnel can be compensated: some can direct their compensation to a personal corporation, while others can’t. The paper then discusses options for allowing all “approved persons” to direct compensation to a personal corporation. Unfortunately, without upfront discussion explaining why we regulate compensation in this way or what the stakes are for dealers’ clients, it’s tough for anyone other than dealers themselves to engage with this consultation. As CIRO’s rulemaking process evolves, we hope they will keep this consideration in mind.

Finally, I want to congratulate Michael Thom, CFA, on his appointment to the board of the Ombudsman for Banking Services and Investments. His appointment comes at an important time of transition for OBSI—they’ll benefit greatly from his input and advice.

CIRO published for comment Phase 2 of its Rule Consolidation Project. The Rule Consolidation Project will bring together the two member regulation rule sets currently applicable to investment dealers (the IDPC Rules) and to mutual fund dealers (the MFD Rules) into one set of member regulation rules applicable to both categories of CIRO Dealer Members. The consolidated member regulation rules will be known as the CIRO Dealer and Consolidated Rules (DC Rules).

The objective of Phase 2 of the Rule Consolidation Project (Phase 2 Proposed DC Rules) is to adopt rules to be retained that are unique to the IDPC or MFD Rules and have been assessed as not having a material impact on stakeholders.

The CAC is generally supportive of CIRO’s rule consolidation efforts that will have the effect of promoting regulatory harmonization and efficiency in regulatory compliance. In particular, they support the proposal to create one uniform financial filing form (Form 1) as considered in Phase 1 of the consolidation project, which will be particularly useful for existing dual-registered dealer entities and also for ease of review.

The CAC would continue to appreciate the inclusion of supporting impact analysis and/or data-driven background relating to the intended purposes of incremental data collection from dealer entities, for a better understanding of the effect on regulatory efficiency and effectiveness, and systemic/macroprudential aspects of securities regulation.

CIRO is requested feedback on its position paper regarding policy options for leveling the advisor compensation playing field.

Currently, Approved Persons governed by the Mutual Fund Dealer (MFD) Rules of the Canadian Investment Regulatory Organization (CIRO) are permitted to utilize an approach where the compensation they have earned through a sponsoring Dealer Member is paid to a party other than themselves. Approved Persons governed by the CIRO Investment Dealer and Partially Consolidated (IDPC) Rules, are not permitted to use such an approach.

The position paper which analyses three policy options for leveling the Approved Person compensation playing field, sets out CIRO’s preliminary position on the option to pursue and requests public comment on which option they should pursue.

The CAC is generally hesitant to support the tax-driven regulatory reforms as contemplated in the Consultation. We are concerned that tax benefits to Approved Persons are being placed paramount to investor protection, and that any perceived benefits may not outweigh the cost to industry in compliance measures. We acknowledge however, that there is industry momentum to pursue changes in this area; considering this, we would prefer CIRO to work jointly with the CSA to establish the regulatory framework necessary to permit the Incorporated Approved Person approach in a fulsome manner at the outset.

The Financial and Consumer Services Commission is seeking comment from the public on the two Proposed Rules to accompany the Financial Advisors and Financial Planners Title Protection Act. 

The purpose of the Financial Advisors and Financial Planners Title Protection Act (the “Act”) is to ensure that professionals using the titles financial advisor or financial planner hold minimum educational standards to be credentialed. 

It is proposed that the framework of the Act will be supported by two rules: Rule TPA-001 General which sets out the criteria for credentialing bodies and their credentials to be approved, and Rule TPA-002 Fees which sets out the fees to be paid to the Commission under the framework.  

The CAC supports the ongoing efforts of the FCNB to harmonize its title protection regime for financial advisors and financial planners cross-jurisdictionally and are particularly encouraged by the FCNB’s progressive approach to fees and the accessibility it would provide to smaller entities and those with fewer title users seeking entry into the regulatory framework.

We would encourage the FCNB to further collaborate with other jurisdictional regulators to further harmonize the application and entry process to better implement and establish the foundation for a pan-Canadian approach to financial consumer protection and regulation in this area.

CIRO is publishing for comment proposed amendments (Proposed Amendments) to support and clarify the short selling framework under the Universal Market Integrity Rules (UMIR). The main objectives of the Proposed Amendments are to:

The CAC is supportive of the Consultation as the requirement to establish a reasonable expectation to settle a short sale is an appropriate and targeted response, and will not place an unnecessary burden on industry or deter short selling generally.

While reliance on easy-to-borrow lists will better ensure an adequate locate for securities and may reduce the number of failed trades, given that short selling is vital to fostering efficient markets and the promotion of price discovery and liquidity, we stress that any regulation in this area should be subject to ongoing data-based reviews.

 

CIRO is publishing for public comment proposed amendments to the Investment Dealer and Partially Consolidated (IDPC) Rules and IDPC Form 1 relating to fully paid securities lending and financing arrangements.

The Proposed Amendments seek to:

The Canadian Sustainability Standards Board (CSSB) is requesting comments and feedback its first proposed Canadian Sustainability Disclosure Standards (CSDS), marking a significant milestone in advancing sustainability reporting in Canada.

The proposed standards aim to set a new benchmark for the disclosure of sustainability-related information, facilitating a more consistent and comparable approach.

The International Sustainability Standards Board (ISSB) issued its first standards in June 2023 – IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2, Climate-related Disclosures.

Committed to the global baseline the ISSB established, the CSSB’s proposed CSDS 1 and CSDS 2 align with IFRS S1 and S2 – but with Canadian-specific modifications suggested. Also available for public comment is a paper discussing how the CSSB proposes to introduce changes, if required, to IFRS Sustainability Disclosure Standards for use in Canada.

Proposed modifications to CSDS 1 and CSDS 2 include Canadian-specific effective dates and transition relief proposals to help with eventual implementation of the standards.

**If you would like to participate or provide comments to ongoing initiatives, please contact cac@cfacanada.org**

Steve Khairy, CFA, CIPM

Steve has served on the CIPC since June 2018. Steve is a Senior Director, Performance Measurement and Attribution at PSP Investments since October 2016. His team is responsible for calculating, analyzing, and reporting performance throughout the organization and to external stakeholders. Prior to this, Steve was working for the Abu Dhabi Investment Council for 8 years, where his last role was Head of Performance and Reporting. While in Abu Dhabi, Steve was also a part-time instructor for a CFA Program course provider. His industry experience also includes performance measurement roles at CIBC Global Asset Management and various positions within RBC Royal Bank. Steve has a Bachelor of Commerce from Concordia University, became a CFA charterholder in 2004, and received the CIPM certificate in 2006.

Why do you think promotion of industry standards like the GIPS standards is important?

By definition, industry standards contribute to alignment and provide guidance. Furthermore, they are established in response to industry needs. Promoting the GIPS standards is particularly important because historical performance is arguably the most critical part of reporting to clients and prospects. By adopting the GIPS standards, firms positively contribute to the asset management industry as they inherently support trust, transparency, and fairness.

Why are you passionate about the GIPS standards?

Firms adhering to the GIPS standards help advance investor confidence. It is critically important that investors are provided with investment performance information they can properly understand, compare, and trust.

Established in 2008, the CIPC was formed as a national initiative of the Canadian CFA Societies and is currently recognized by CFA Institute as the official sponsor of the GIPS^® standards for the Canadian market.

We are looking for candidates with expertise in at least one of the following areas:

Applications are due April 15, 2024.

CFA Institute has launched their 2024 Compensation Survey!

Members, please check your email to find your invitation from CFA Institute to participate!

Since 2019, CFA Institute members have depended on this survey to guide salary negotiations, career planning, and setting compensation within teams.  

Your participation is crucial as the depth of the analysis is directly proportional to your participation—the more members who contribute, the more insightful and valuable the data becomes.

Survey responses are due by April 30.

Last call to register for the next edition of CFA Societies Canada and the University of Toronto - Rotman School of Management's co-presented book launch series:

Clear Thinking and Achieving Extraordinary Results by Shane Parrish 

Register to attend in-person on April 15 at 6:00-7:00 pm. Virtual Streaming is available exclusively to Canadian CFA Society members. The registration fee of $41.00+HST includes a copy of the book (Discounted to $36.00+HST for Society members with code, which your local society can provide). 

Volunteers are actively being recruited to serve on the following CFA Institute Global Industry Standards (GIS) committees and subcommittees as indicated below:

Applications for GIPS Standards volunteer positions will close 20 May 2024 by 17:00 US EDT. Applications for ESG Technical Committee volunteer positions will close 3 June 2024 by 17:00 US EDT.

In this brief, practitioners introduce the key features of the alternative credit asset class. Each contributor to the book takes a deep dive into one of seven types of alternative credit sub asset classes. They spotlight leading transactions to evaluate those features and their implications for investors. They also discuss the market’s anticipated continued growth and potential evolution.

The 12th edition of the CFA Institute Standards of Practice Handbook, updated to reflect the latest changes to the Code of Ethics and Standards of Professional Conduct, has been released. The material in the Handbook represents the foundation of the ethics education efforts of CFA Institute and is the primary resource for guidance in interpreting and implementing the Code and Standards. The Handbook seeks to educate members and candidates on how to apply the Code and Standards to their professional lives in a variety of situations. 

On this episode of the Enterprising Investor podcast, host Mike Wallberg, CFA, interviews Mark Higgins, CFA, author of "Investing in US Financial History." Mark delves into the comprehensive process of breaking down US financial history from 1790 to the present day, highlighting key inflection points and the evolution of the financial system. Join Mike and Mark as they uncover the compelling insights from centuries of financial markets in this engaging discussion.

Formerly Guiding Assets, Enterprising Investor is the flagship podcast of CFA Institute and the definitive program for the investment management industry. 

In this episode of The Sustainability Story, host Andres Vinelli interviews Marcos Buscaglia, an economist and author of Beyond the ESG Portfolio: How Wall Street Can Help Democracies Survive. Marcos discusses the impact of capital markets on funding democracies and autocratic regimes, emphasizing the importance for investors to consider democracy amidst global democratic decline. He highlights the interconnectedness of countries and how a democratic decline in one nation can have repercussions worldwide. Marcos' insights shed light on the role of capital markets in shaping political landscapes and the need for ethical investment practices.

The Canadian Advocacy Council, on behalf of CFA Societies Canada, advances investor protection, industry professionalism, market integrity and transparency to the benefit of society.

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Next CAC Meeting Scheduled: Tuesday, April 9 at 4:15 pm EDT

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