What’s new with the CAC?

Advancing investor protection, industry professionalism, and market integrity across Canada, the CAC works to focus attention on pressing advocacy files dominating the regulatory agenda. Ensuring fair, equitable, and sustainable outcomes for stakeholders is more important than ever, and through our growing relationships with policymakers and regulators, we are working on several important initiatives. Below is a summary of three areas where we have recently provided comment letters to the consultation processes. To see the comprehensive catalogue of our commentary letters, visit us online.

Published Canadian Advocacy Council of CFA Societies Canada (the “CAC”) comment letters

FCNB and NSSC Consultation Paper on Diversity in the Capital Markets

The CAC supports the intent of the Financial and Consumer Services Commission (FCNB) and Nova Scotia Securities Commission (NSSC) to continue to consult on diversity in the capital markets and, particularly, on how the disclosure needs of Canadian investors have changed since the existing gender diversity disclosure requirements for issuer boards were adopted. Regulatory efforts to encourage gender diversity in Canadian capital markets should evolve to become more overtly supportive of multifaceted diversity, equity, and inclusion across a wider range of participants in the Canadian capital markets, extending beyond gender diversity.

Research has shown the benefits of diversity in decision-making across a range of corporate and investment decision structures, and policy should be more overtly supportive of progress to this end. For example, boards with members of diverse backgrounds are more likely to act independently of management and are better equipped to debate the merits of complex governance matters such as managerial oversight or financial transactions. To achieve and maintain targets, it is critical for a firm to create an inclusive culture to both attract underrepresented individuals to the firm and create an environment where they are more likely to stay. Indigenous reconciliation also dictates greater inclusion of Indigenous people in corporate Canada.

Regulators can be leaders through their examples and encourage progress throughout the Canadian capital markets through education, policy, and regulatory efforts. There is a robust body of research that demonstrates the benefits of diversity to all of investors, issuers, and the broader stakeholder community and an emerging societal consensus that demands further action.

CSA NI 51-102 Continuous Disclosure Obligations

We are supportive of the Canadian Securities Administrators’ (CSA) intent to streamline and reduce duplicative disclosure.

As it relates to reducing duplicative disclosures and improving usability, we believe the existing inaccessibility and lack of ease of use and machine readability of the System for Electronic Document Analysis and Retrieval (SEDAR) impedes investor access to existing disclosure information.

We support new disclosure statements that will remove certain materiality qualifiers and subject all disclosure requirements to the qualification that issuers must focus on material information as set out in the instructions; however, we would appreciate confirmation that any such change would conform with the understanding of and thresholds relating to materiality in Canadian accounting standards and under International Financial Reporting Standards (IFRS).

We remain concerned with respect to the potential introduction of a framework for semi-annual reporting for certain venture issuers.

Given global policy and regulatory focus on disclosure and standards related to environmental, social, and governance (ESG) factors, particularly those relating to issuer disclosure, we believe the future integration of ESG reporting will become an essential part of a reporting issuer’s continuous disclosure. Any mandated disclosure should be an integrated part of annual disclosure statements and not contained in a stand-alone document for ease of investor access and reference.

Additionally, the forms will continue to require certain information with respect to an issuer’s credit rating, while removing the requirements for much of this information that can be found by investors elsewhere. Going forward, some issuers may also wish to include information related to their ESG or sustainability rating(s), which may cause some investor confusion if it is not contextualized as being presented without assurance and properly represented as assigned by and redistributed from third parties with appropriate links to disclosures on respective ratings frameworks and methodologies.

CSA Position Paper 25-404 New Self-Regulatory Organization Framework

The CAC fully supports efforts to create a new Self-Regulatory Organization Framework (New SRO) that has a clear public-interest mandate and focuses on investor protection and the promotion of public confidence in capital markets. Our comments relate to areas within the Position Paper related to governance matters, investor interests and representation, proficiency requirements, and conduct and enforcement matters.

Governance

It is important that the governance structure, avenues for investor input, professionalism, and investor recalibrations for the New SRO all embody the common goals of accountability and the public interest.

Investor Representation and Integration of Investor Interests

We support the proposed formal investor advocacy mechanisms for the New SRO. The New SRO should be subject to similar transparency and public reporting principles imposed on statutory regulators, and complaints and concerns about the New SRO should be handled within the CSA framework.

Proficiency

It remains critical for the New SRO to be a driver of professionalism and robust continuing education standards in the investment industry. Individuals registered with members of the New SRO should be subject to meaningful (and consistent) continuing education requirements, focusing on the skills needed to deliver professional, competent, ethical, and effective investment and financial advice to all Canadians.

Conduct and Enforcement

The new Recognition Order proposes transparency in enforcement notices with respect to the processes for assessing firm supervision and reasons for disciplinary decisions. We have previously suggested that additional transparency with respect to enforcement proceedings is sorely needed, particularly surrounding the impact of past decisions (i.e., precedential value) and mitigating circumstances.

With respect to the market surveillance mandate of the New SRO, the current functions performed by the Investment Industry Regulatory Organization of Canada (IIROC) work well, and the transition of this team and its expertise to the New SRO should yield a positive regulatory outcome. We continue to encourage strategic and operational cooperation and integration (officially led by and operationalized by the New SRO) between the current market surveillance regulatory functions and related functions at the CSA, particularly to address systemic risk concerns.

Other Letters Filed:

• CPAB Regulatory Disclosure Consultation
• FCNB Regulation of Financial Planner and Financial Advisor Titles
• FCAA The Financial Planners and Financial Advisors Regulations
• Department of Finance Strengthening Canada’s External Complaint Handling System
• CSA NI 45-106 Listed Issuer Prospectus Exemption
• AMF Draft Regulation respecting Complaint Processing and Dispute Resolution in the Financial Sector
• FCAC Draft Guideline on Complaint Handling Procedures for Banks and Authorized Foreign Banks
• OSC Notice 11-794 and Request for Comments – Statement of Priorities for Financial Year to End March 31, 2023
• IIROC Consultation Paper (Phase II) - Competency Profiles for Directors, Executives, Ultimate Designated Persons, Chief Compliance Officers, and Chief Financial Officers

Have your say

If you would like to participate in advocacy activity related to these letters or future policy and regulatory initiatives, provide comments on ongoing initiatives, or learn more about volunteer opportunities in advocacy or as a part of the CAC, please contact cac@cfacanada.org.

Follow CFA Societies Canada on LinkedIn.

Who is the Canadian Advocacy Council?

The Canadian Advocacy Council (CAC) is a volunteer advocacy council for CFA Societies Canada, representing the twelve Canadian CFA Institute Member Societies and, ultimately, Canadian CFA charterholders. The council includes investment professionals from across the country who review regulatory, legislative, and standard-setting developments affecting investors, investment professionals, and Canadian capital markets. The CAC strives to advance market integrity, transparency, and investor protection, and actively engages Canada’s securities regulators, self-regulatory organizations, industry associations, legislators, and other stakeholders through thoughtful leadership, direct engagement, and the publication of comment letters.