Investment industry regulation is stuck in the dark ages



Industry internal dialogue can make you think that the investment industry still operates in the dark ages.
Industry internal dialogue can make you think that the investment industry still operates in the dark ages.

If investors could listen to conversations about how the investment business is regulated, I am sure their blood would boil.

There has been talk about reforming the investment industry for two decades. So far, it is pretty much business as usual.

That might change. A new co-operative capital markets regulator (CCMR) is being discussed.

The comment period for the proposed new regulations ended at the end of December 2015. We should hear the final results this year.

Some of the opinions put forward by industry associations are resisting changes that would be beneficial for individual investors.

This seems absurd.

The business model of any industry should be to put the customer first. Especially in an industry as important as investments.dark ages - customer first

The Investment Industry Association of Canada (IIAC) is against the notion of introducing a fiduciary duty, or a best interest standard for investment advisors.

It is my opinion that most investors would automatically assume that all investment advisors should be required to conduct themselves in the “best interest” of their clients.

Any lesser standard would be unacceptable.

The Independent Financial Brokers of Canada (IFB) is also against any changes that might allow raising conduct standards for advisors.

They want the status quo to remain.

A move to best-interest standard

On the other side of the argument is the Canadian Foundation for Advancement of Investor Rights (FAIR) and the Ontario Securities Commission’s Investor Advisory Panel (IAP).

Both of these organizations support moving to at least a best interest standard.

IAP’s comment was “a best interest standard would immediately require advisors to be the true agents of their clients, putting clients’ interest first.”

It wants this embedded in the new regime.

Organizations are arguing for and against individual investors having greater protection. In the spirit of democracy, the ultimate decision should be what is best for the citizens of Canada.

When Canadians turn over their life savings to an investment advisor they are entitled to expect that advisor to put their interests first.

The fact that we are having this conversation is in itself a joke.

Rights of individuals should be put first

In our advanced society the rights of individuals must be put first regardless of with whom they are dealing. This includes receiving the advice from your doctor, lawyer, accountant and anybody else you rely on for counsel that is critical to your well-being.

On another front, recent research about the fee structures of mutual funds done by the Canadian Securities Administrators (CSA) is going to result in changes.

The CSA will release its decision on fee structures and conduct standards during the first half of 2016.

All this industry internal dialogue can make you think that the investment industry still operates in the dark ages.

Canada is an advanced society. We have evolved into a well-functioning country that respects the rights of individuals. This is who we are.

It is time that the investment industry catches up with the rest of the country. All industry participants should put the interest of their clients first.

After too many years of talking about better regulations in the investment industry, it is time for the regulators to make the correct decision.

Regulators must favour the individual investor and do something bold that their predecessors have failed to accomplish.