The Investor Advisory Panel Seeks Your Input
The Investor Advisory Panel’s mandate is to represent the views of investors by providing written comment to the Ontario Securities Commission with respect to certain policy initiatives, including proposed rules and policies, the annual Statement of Priorities, concept papers and specific issues. To assist in fulfilling our mandate, the Panel requests your comment on various initiatives that the Panel is considering. The input that we receive will assist the Panel to formulate responses to policy initiatives and the OSC’s Statement of Priorities. If you have constructive comments about investor-related issues that are not listed below, we welcome your input and views on those issues as well.
Point of Sale
In order to provide more meaningful information to mutual fund investors when they are considering an investment decision, the Canadian Securities Administrators (CSA) has developed a new point of sale disclosure framework. Mutual funds will be required to prepare a new disclosure document called “Fund Facts” that highlights the potential benefits, risks and costs of investing in the fund. The CSA intends to implement the disclosure framework in three stages. Stage 1, which is expected to take effect on January 1, 2011, mandates the production of the Fund Facts document which must be posted on the fund’s website and delivered to investors on request. Stage 2 is a proposal to allow the delivery of Fund Facts to satisfy the requirement to deliver a prospectus within two days of buying a mutual fund and will likely be published sometime in 2011. Stage 3 would implement point of sale delivery for mutual funds. Additional information is available at Implementation of Stage 1 Point of Sale Disclosure for Mutual Funds.
What are your views on the point of sale proposal and the fund facts concept in particular? Will the proposal protect investors and provide them with the key information necessary to make these important decisions? Is other information (such as personalized rates of return) necessary? Should investments other than mutual funds and segregated funds be covered as well?
Responsibility for investigating and prosecuting financial market crimes and misconduct is divided between the provinces and the federal government, and between various agencies and institutions of which the OSC is one. The OSC’s enforcement focus is designed to protect investors and markets from abuse by identifying serious risks associated with breaches of the Securities Act (Ontario) and taking actions to deter illegal conduct. Market participants who do not comply with securities laws may face a number of penalties under the Act. Additional information about the OSC’s approach to enforcement is available in the current Statement of Priorities.
The media, some politicians and members of the public have expressed concerns about Canada’s record in prosecuting and deterring financial market crimes and other misconduct. What specific policies or amendments to existing law should the Panel advocate with regards to enforcement of securities laws?
Fiduciary Standards for Financial Service Professionals
Whether financial service professionals should owe a fiduciary duty to act in the best interests of their clients has been raised in discussions about regulatory reform following the financial crisis. In particular, the Dodd-Frank Act provides the U.S. Securities and Exchange Commission with the legal authority to impose a fiduciary standard on broker-dealers. By contrast, in Canada, dealers and other financial service professionals must meet know-your-client and other suitability requirements which do not necessarily require them to adhere to a fiduciary standard.
Should Ontario move towards requiring financial advisors and salespeople to bear a fiduciary obligation to their clients? Should financial service professionals be liable to clients in the event that they fail to act in their clients’ best interests? How would this reform change the Canadian financial services landscape if implemented?
Credit Rating Agencies
The Panel recently submitted comments relating to Proposal National Instrument 25-101 - Designated Rating Organizations. While the comment period has now closed, the Panel continues to be interested in investors’ views on this submission and whether additional measures should be considered from a regulatory standpoint. Does the proposed instrument, and the IOSCO principles on which it is based, go far enough in ensuring that investors are protected with regards to securities that have been rated by a credit rating agency?
Initiatives in Other Countries
The Investor Advisory Panel firmly believes that investors in Ontario should be as well protected as investors in other developed markets. New rules and policies to protect investors in the U.S., the U.K., the European Union, Australia and elsewhere are being considered in the wake of the global financial crisis as is evident in the U.S. Dodd-Frank Act. What practical measures should the Panel consider in light of regulatory action, public education and other measures in jurisdictions around the world? How well do such initiatives translate to Canada’s regulatory system?
Comments and Submissions
You may provide your comments by email by selecting the “Submit Comment” box below. You may also provide written comments in hard copy or electronic form. It would be helpful to receive your comments by January 15, 2011 but this is not a hard deadline. The Panel is interested in hearing your views at any time.
If you prefer to send your comments in hard copy or electronic form instead of the box above, you may send them to the address below. All comments will be forwarded to the Investor Advisory Panel and may be posted on the Panel’s webpage.
Senior Administrator, Investor Advisory Panel
Ontario Securities Commission
20 Queen Street West
Suite 1900, Box 55
Toronto, ON M5H 3S8