An investor advocacy group is calling for tougher regulation of scholarship plans, beefed up disclosure requirements, stronger suitability standards, SRO oversight, and fee regulation.

Back in March, the Canada’s securities regulators published for comment proposals designed to modernize regulation of scholarship plans. Regulators proposed to overhaul disclosure requirements as a first step, and said that in future they will propose a new operational rule for plans, and will consider requiring SRO membership for dealers and reps.


In a comment letter to the Canadian Securities Administrators published Thursday, the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) recommends a number of changes to the proposed new disclosure documents, and that suitability requirements be strengthened, among other things.

For the planned new disclosure documents, FAIR Canada recommends requiring: a clearer discussion about fees; simple disclosure of the financial performance of the plan; and, that potential investors be advised to consider alternative education savings plans. FAIR Canada also recommends that physical delivery of the new disclosure documents be required before a sale is made.

Regarding the second and third phases of the planned regulatory reform, FAIR Canada recommends that salespeople be required to confirm that they have explained all of the information in the disclosure summary to investors, including the availability of other types of education savings plans; and that they be required to explain the potential unsuitability of scholarship plans for some investors.

It also recommends that the suitability standard should be strengthened to require that salespeople act in their clients’ best interests when offering scholarship plan products; that the CSA consider substantively regulating fees; and that dealers and salespersons should be obliged to become members of an SRO.

IE