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August 2023 Advocacy Newsletter
Summary:
Two years ago, the client-focused reforms started taking effect. These reforms generally require securities advisers and dealers, when faced with material conflicts of interest with retail clients, to resolve these conflicts in the best interests of these clients.
Earlier this month, Canadian securities regulators published initial findings from a compliance review meant to evaluate firms’ implementation of these reforms. The results sound troubling. Regulators say roughly 80% of the firms reviewed fell short of the reforms’ standards on conflicts of interest.
Does this reflect firms’ failure to grapple with the implications of the reforms? Or regulators’ failure to fully communicate how these reforms apply to individual firms’ circumstances?
In all likelihood, it’s a bit of both. And maybe regulators should do more to recognize that. Instead of casting compliance reviews as enforcement proceedings in miniature, regulators could recognize them as the collaborative exercise they are supposed to be. Regulators and firms alike learn from these reviews. Regulators gain insight into how their reforms work on the ground, allowing them to offer guidance that maps the intent behind their reforms onto firms’ on-the-ground realities. Firms, in turn, gain insight into this intent and identify opportunities to adapt their practices in light of it.
Regulatory staff don’t hold a monopoly on regulatory expertise. That’s why CAC’s participation in the rulemaking process is so important. And it’s why I hope regulators will seize more opportunities to continue engaging with and learning from stakeholders after the rulemaking process is complete.