As provincial securities commissions contemplate the possible introduction of a statutory duty to put the best interests of clients first, the Investment Industry Regulatory Organization of Canada (IIROC) is pledging to ensure that its rules require full-service advisors to adhere to a best interests standard.
Speaking at an industry reception at the Toronto Board of Trade on Monday, Andrew Kriegler, IIROC president and CEO, reiterated the self-regulatory organization’s stance that its rules already effectively require full-service advisors to put their clients’ interests before their own.
“Our rules say explicitly that any conflict of interest between a registrant and their client must be resolved in a fair, equitable and transparent manner, and consistent with the best interests of the client,” Kriegler said in his remarks.
However, he acknowledged that there’s work to be done to ensure that advisors are living by this maxim. “To be sure, making these words truly ‘live’ will take more work. Ensuring that, for example, firms not only have, but follow, clear policies and procedures on compensation-related conflicts is an effort we’ve begun but which will take time to complete,” Kriegler said.
Moreover, regulators must, “ensure that the words ‘conflict of interest’ are not interpreted narrowly but broadly — as is just and appropriate,” he said. And, he allowed that IIROC may need to revise its rules to make this clear. “This too will take time and may require some rewording of our rules,” Kriegler added.
“But let me be clear, as we have already said, we will make certain that our rules and guidance put the best interest of the client ahead of the interests of IIROC-regulated dealers and their representatives,” he stressed. “This can only improve public confidence in our markets and our financial system and contribute to their health and vibrancy.”
Elsewhere in his remarks, Kriegler reiterated IIROC’s call for enhanced enforcement powers, such as the ability to enforce penalty judgments on individuals, who can currently avoid IIROC sanctions against them in most provinces by simply leaving the industry.
In Ontario alone, IIROC has almost $20 million in uncollected fines against individuals, and a collection rate of just 12%, Kriegler reported. IIROC will continue to seek the power to enforce these fines, which it already has in Alberta and Quebec, in Ontario and other provinces, he added.
“Nobody disagrees. So it is not a question of convincing governments that our view is right and another is not. There is no other view,” Kriegler said. “The only task is to convince governments, here in Ontario and across the country, that the time to act is now.”
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