If the Ontario Securities Commission (OSC) can’t convince other provincial regulators to introduce a fiduciary duty on advisors, and to reform conflicted industry compensation structures, the OSC should go it alone, says the OSC’s Investor Advisory Panel (IAP).

In a letter to Eleanor Farrell, director of the Office of the Investor at the OSC, the independent IAP says that its top priorities for improving investor protection include adopting a fiduciary duty on retail advisors; reforming industry compensation structures; ensuring adequate access to dispute resolution and investor restitution; and, reforming advisor proficiency and titles.

Of those issues, the IAP notes that the OSC is already examining the merits of a best interest duty and reviewing mutual fund fee structures, as part of consultations initiated by the Canadian Securities Administrators (CSA) back in 2012. And, it calls on the OSC to act quickly on these issues.

“We have debated, discussed and studied the issues and their solutions for many years,” it says. “It is time for decisions that will lead to a more robust investor protection regime in Canada.”

Indeed, the IAP suggests that the OSC should be prepared to go it alone with these reforms, if necessary. It says that if the OSC “is unable to convince its CSA colleagues of the imperative to replace the inadequate and outdated suitability regime and current conflicted compensation structures with higher standards of investor protection and to make these changes within a reasonable timeframe, we urge the Ontario Securities Commission to demonstrate the necessary leadership and move alone to protect the citizens and investors of Ontario.”

As for its other priorities for reform, the IAP says that they also be priorities for the commission, arguing, “Efforts in these areas would contribute to the professionalism of the industry and investor protection.”

Next: Enforcing OBSI recommendations for compensation
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Enforcing OBSI recommendations for compensation

In a separate letter to the OSC, the IAP also calls on regulators to address the inability of the Ombudsman for Banking and Investment Services (OBSI) to enforce its recommendations for investor compensation. It notes that it has previously urged regulators to address OBSI’s inability to enforce its recommendations, and to possibly start enforcing those recommendations themselves. However, it says that “the CSA has not responded to our recommendations, nor have they addressed the urgent matter of restitution.”

“Our investor protection regime must provide access to timely, independent and free financial redress. Canadian regulators cannot continue to ignore this clear and pressing need,” it argues.

The IAP also notes that the planned expansion of OBSI’s jurisdiction to exempt market dealers (EMDs) and portfolio managers (PMs), the creation of a new CSA oversight mechanism for OBSI, and OBSI’s decision to give up the ability to investigate possible systemic problems, raises some issues. As a result, it calls on the CSA to “clarify and explain how they and the [self-regulator organizations] will meet their new obligations, following referrals to them by OBSI, to identify, investigate and compensate investors who may have been harmed by systemic failures.”

It also wants more information on how the CSA intends to ensure that: EMDs and PMs are complying with their new obligations to use OBSI for investor complaints; OBSI can fund and manage its expanded workload; and, firms are complying with client complaint handling standards.