Industry firms are getting more time to implement sweeping new investor protection rules known as the client-focused reforms (CFRs).
The Canadian Securities Administrators (CSA) issued a pair of orders that grant relief to firms, pushing back adoption of the new conflict of interest provisions by six months to June 30, 2021, and delaying the CFRs’ new disclosure requirements by a year to Dec. 31, 2021.
The conflict and disclosure measures were both due to take effect at the end of 2020. The rest of the requirements were already slated to come into force at the end of 2021, and that deadline has not changed.
The CSA indicated that it has delayed the implementation of the conflict provisions by six months due to the disruption caused by the Covid-19 outbreak, whereas the shift in the deadline for adopting the disclosure provisions is intended to make the implementation more efficient.
Citing its work with the industry on a CFR implementation committee, the CSA said “it has become apparent that the implementation of the relationship disclosure provisions should occur at the same time as the ‘know your product’ and enhanced suitability provisions of the reforms on December 31, 2021, to avoid the need to make adjustments on more than one implementation date.”
The Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada, which still have to draft their own rule changes to conform to the CSA’s new rules, will also harmonize their revisions to the new CSA deadlines.
“We recognize that as a result of the pandemic registered firms are facing enormous and unprecedented operational pressures that impair their capacity to pursue the scheduled implementation of the Client Focused Reforms,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers.
Amid the delay in long-awaited investor protection reforms, the CSA is nevertheless calling on firms to consider the spirit of the reforms when interacting with their clients, “since clients are relying on registrants more than ever to provide them with advice that puts their interests first during these challenging circumstances.”
“The reforms are based on the fundamental concept that clients’ interests come first in their dealings with firms and individuals that are registered to give investment advice and trade in securities. They also require that registrants address material conflicts of interest in the best interest of their clients,” the CSA said.
“While reiterating the importance of these reforms, we are providing this relief to ensure registrants have the capacity to remain focused on front-line activities and use all their efforts to diligently respond to the current needs of their clients,” Morisset added.
Additionally, IIROC said that it will delay implementation of its new plain language rulebook to the end of 2021 as well, citing the CSA’s delay in the implementation of the CFRs.
“IIROC is committed to helping investment firms navigate through the Covid-19 pandemic,” said Irene Winel, senior vice-president, member regulation and strategy at IIROC.
“IIROC will continue to collaborate with the CSA and other regulators to protect investors and the integrity of Canada’s capital markets during these unprecedented times,” she added.