PrefBlog

In a rare outbreak of common sense, the Canadian Securities Administrators have decided not to ban trailer fees, but spoiled it by adding a lot more paperwork:

The Canadian Securities Administrators (CSA) has decided not to ban embedded commissions after all. Instead, the group of provincial and territorial regulators have proposed new rules for dealers and financial advisors to address any potential conflicts of interest in clients’ best interest or avoid them altogether, as well as to eliminate all forms of deferred sales charges (DSCs).

In addition, the CSA has decided to prohibit dealers that don’t make a suitability determination when selling mutual funds, such as discount brokerages, from receiving trailing commissions.

The long-awaited decisions were delivered on Thursday in a staff notice outlining these measures and in a 120-day comment period proposing amendments to registrant conduct provisions. (The CSA stated in the staff notice that it anticipates publishing a notice and request for comment in September.)

Although the CSA’s staff notice points out that “regulatory action is required to mitigate the inherent conflicts of interest associated with embedded compensation and to ensure the investor’s interest is paramount,” the regulators are instead proposing enhanced conflict of interest mitigation rules and guidance for dealers and advisors on all securities because these conflicts “are not unique to mutual funds.”

Thus, as part of the proposed amendments to the registrant conduct provisions, dealers and advisors will be required to: address conflicts of interest in clients’ best interest, including those resulting from compensation arrangements and incentive practices; put clients’ interests first when making a suitability determination; and do more to clarify for clients what they should expect from registrants.

This entry was posted on Thursday, June 21st, 2018 at 10:56 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.