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 two areas where we have recently provided comment letters to 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

The Canadian Investment Regulatory Organization (CIRO) – Proposal on Distributing Funds Disgorged and Collected Through CIRO Disciplinary Proceedings to Harmed Investors

The Council supports measures that aim to redirect ill-gotten gains to harmed investors and advocate for cost–benefit analysis and improved outcomes for investors. However, we have concerns about the proposed policy’s necessity, effectiveness, and justification. Further, we question whether the policy’s benefits outweigh the costs, citing the limited success of prior collection efforts on legally mandated repayment orders. Additional details are needed on the program’s implementation, including the adjudication process for investor claims and the identity of the program administrator.

Additionally, we have concerns that member firms may alter their harmed investor compensation behaviours due to the proposed policy. We question the priority of claims when a repayment order is made alongside a regulatory fine, and whether the Canadian Investment Regulatory Organization (CIRO) would and should pursue all such orders regardless of their collectability. We request clarity on the mechanics of the distribution of funds among claimants and the inclusion of the minimum value for claim recognition and payment.

Finally, we cite the increased potential for investor confusion due to adding another program in the investor compensation/claims resolution landscape. Investors will need to navigate multiple confusing options at the risk of overlapping processes and potential limitations on claims.

FSRA Consultation on Updated Proposed Amendments to the Unfair or Deceptive Acts or Practices Rule

We have submitted a letter to the Financial Services Regulatory Authority of Ontario (FSRA) regarding the latest proposed amendments to the Unfair or Deceptive Acts or Practices (UDAP) Rule. While we support the amendments, we are concerned that the changes do not adequately protect policyholders from unfair sales charge practices.

The CAC reiterates its support for banning all upfront compensation structures across the insurance and investment industry, including advisor chargebacks. Such conflicted compensation structures should be uniformly prohibited to ensure consistent standards and avoid regulatory arbitrage. The CAC emphasizes that advisor chargebacks pose irresolvable conflicts of interest and should be banned. Disclosure alone is insufficient as a conflict mitigation tool, especially when there are inadequate controls to ensure that the information is effectively communicated and understood by policyholders. We advocate for additional supervisory tools and broader rulemaking authority to be granted to FSRA to address conflicts in agent conduct further and strengthen regulatory oversight.

We note the ongoing review by the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) regarding chargebacks in the mutual fund industry and believe this presents a unique opportunity for regulators in both the insurance and securities sectors to address the conflicts posed by these fee structures through regulatory prohibitions.

The CAC urges FSRA to ban advisor chargebacks outright, emphasizing that this would better align agents and their customers and help eliminate compensation structures that distort the interests of agents relative to those of their customers. Such a ban would effectively limit undesirable outcomes and promote the trust and integrity of the insurance and securities industries.

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.

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Who is the Canadian Advocacy Council?

The Canadian Advocacy Council (CAC) is a volunteer advocacy council of 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.