Testing and user-friendly systems are some of the easiest ways to improve disclosure for retail investors and to evaluate its effectiveness, according to experts speaking at the Rotman Capital Markets Institute’s Discussion on Disclosure panel on Tuesday.

The Toronto event was co-hosted by the Canadian Foundation for Advancement of Investor Rights (FAIR Canada).

The ongoing rollout of the second phase of the client relationship model (CRM2) is an opportunity for securities regulators to further the evaluation of disclosure and evaluate its impact, according to Mary Condon, a professor at Osgoode Hall Law School, York University and one of the event’s panelists.

“[CRM2 is] a great natural experiment to really attempt to determine [whether] investors make different decisions as a result of receiving this [disclosure] information,” said Condon, a commissioner with the Ontario Securities Commission (OSC).

As such, conducting a post-implementation review of the CRM regulatory regime in operation will allow regulators and the industry to fully understand the outcome of these new rules. “When you introduce a large volume of new rules and practices,” said Ian Russell, president and CEO of the Toronto-based Investment Industry Association of Canada (IIAC), “it’s inevitable that there will be some unintended consequences.”

It’s still too early to tell whether such tests will take place and what they would look like because CRM2 is in its early stages, said Condon, and it would take some time to gather sufficient data to be analyzed particularly around performance reporting. If and when the tests do happen, however, Condon and Russell agree that the implications for advisors and investors must both be evaluated.

In addition to testing, disclosure for retail clients can be improved through user-friendly and timely systems. “The disclosure [documents] I like are the ones that are really easy for me to interpret,” said Sunita Sah, assistant professor of business ethics, Georgetown University in Washington. Sah gave the example of a five-star rating or grades as systems that are easily understood by consumers. For example, in such a system, an investment product that is conflict-free would receive a five-star rating or an A grade.

For Ed Weinstein, president of the Toronto-based Brondesbury Group, advance notice is key to an effective disclosure discussion. According to Weinstein, financial advisors should send clients the fund facts document, or something as concise, to clients via email before a set meeting to discuss fees or conflicts of interest.