No quick resolution to fiduciary duty, trailer fees: OSC

The only notable change to the draft statement that was published for comment earlier this year is the addition of a commitment to continue working on shareholder democracy issues; a number of commenters complained about the omission of previous promises to review the proxy voting system, among other things.

In its notice finalizing its priorities, the commission also addresses some of the major issues discussed in the comments received on the priorities, including the Canadian Securities Administrators’ (CSA) ongoing reviews of the mutual fund fee structure and the possibility of adopting a statutory best interests standard for financial advisors. The OSC also held a series of roundtables on these issues in recent weeks, which, it says, has highlighted the fact that these issues are complex and interconnected.

In the notice, the OSC says that the feedback it has received on these issues “has underscored our view that the issues surrounding a ‘best interest duty’ and ‘mutual fund fees’ are complex and some aspects of the issues are interrelated.”

It stresses that it is important to “fully understand what the best interest duty really means and what options there may be to improve the investor/advisor relationship.” And, it says that a number of commenters provided suggestions regarding proficiency and the need to raise standards. “The comments and issues raised will be considered as part of our review of advisors’ responsibilities to investors,” it says.

However, it suggests that these complex issues won’t be resolved quickly. “The need for clear understanding of the issues and careful analysis of the potential impacts is critical as the regulatory choices will likely have material impacts. As a result, the OSC does not expect these issues to be fully resolved in 2013-2014,” it says.

The OSC does say that it’s, “committed to developing a balanced and responsible solution that best meets the needs of investors and market participants.” While it doesn’t expect to resolve these issues in the coming year, it does promise to publish a document that includes an update of its consultation findings and identifies proposed next steps to address these issues.

Similarly, it suggests that there won’t be any quick decisions on whether to open up the exempt market with new exemptions, including a possible crowdfunding exemption. “Support for exempt market changes was mixed with some calling for implementation of a harmonized offering memorandum (OM) exemption that is applicable in all CSA jurisdictions with others completely opposed or expressing caution against the introduction of any new exemptions absent adequate data regarding the exempt market in Canada. Almost all commenters were opposed to crowdfunding citing investor protection concerns,” it notes.

“This lack of congruity in support for any one exempt market policy option is evidence of the need for the consultations and review of the options that are proposed,” it says.

Additionally, the commission notes that some of the other issues raised by commenters will be addressed as part of its broader plans. For example, it says that it will be working to address the recently announced Ontario Government initiative aimed at increasing the representation of women on boards of directors.

It also says it recognizes the need for a single, comprehensive tool that would allow investors to check the regulatory background of a potential advisor or investment firm. “The OSC agrees that this would be a useful addition for investors and is supporting CSA efforts to implement a more comprehensive, one-stop information source for investors.” And, it says that it “agrees with the suggestion to support the Office of the Investor and provide the resources needed to provide additional focus and attention on seniors.”

Finally, the commission notes that it aims to improve its cost-benefit analysis, and to improve its own accountability by developing better performance indicators.