Relief in sight from anti-spam rules

The revisions are “a good news and bad news story,” says Tim Banks, a lawyer at Fraser Milner Casgrain LLP in Toronto who advises on privacy and e-commerce matters. “The good news is that Industry Canada did listen to some concerns that were being raised by businesses.” However, he adds, on the downside, record-keeping requirements remain heavy.

Greg Pollock, president and CEO of Advocis in Toronto, has mixed feelings about the draft revisions. He is pleased that Industry Canada now will allow online referrals and says that the changes are “definitely a positive and a step in the right direction.”

But Pollock adds that the revisions still fall short: “The regulations will not allow broad outreach to the public from financial advisors in order to educate them about financial advice and about financial products.”

On the upside, Banks says, the proposed changes include exemptions for commercial electronic messages sent within a business or between businesses that are already in a business relationship.

The draft regulations also expand the “family and personal relationship” exemption. To use the personal relationship exemption in the previous version, Banks says, “you had to have had a communication within the past two years, and there would have had to have been some face-to-face component to that communication.”

The proposed revisions accept that some personal relationships may be only virtual and that the two-year requirement is arbitrary. Now, Banks says, all that’s needed is to “demonstrate that you’ve had direct two-way communication, like a telephone call, and that it would be reasonable to conclude, based on the circumstances, that you have a personal relationship.”

Another important change that affects the investment advisory community deals with third-party referrals. The regulations now include an exception allowing a business to send one commercial electronic message without consent, based on a referral from a third party.

“An exemption for third-party referrals is a major victory for the providers of professional services,” says Banks. “The expansion of the definition of ‘personal relationship’ could also relieve some of the burden in marketing to friends and close acquaintances. But for the most part, the regulations will still require investment advisors and other professionals to set up a new record-keeping system that keeps track of the basis on which they had obtained the consent of their prospects to receive marketing material.”

@page_break@ The proposed revisions do little to alleviate the paperwork burden, Banks says: “For the most part, the regulations still require a lot of paperwork on the part of investment advisors and other professionals who are seeking to market their services.”

Often, the lead time between sending out information to a potential client and the time they actually engage an advisor is quite lengthy. The proposed regulations don’t take into account the fact that a relationship of trust develops over a long period of time within professional services industries.

“The difficulty here,” Banks says, “is that you are not going to be able to [act on a sales lead] without going back and getting express [written] consent. Even if someone has given express consent, it has to be recorded. And if someone, for whatever reason, hits the ‘unsubscribe’ button, that’s it – no more communications with them. That sales lead is now gone to you unless [the potential client] comes back. You cannot pursue it any longer.”

Pollock says that the proposed regime still places unnecessary restrictions on advisors’ ability to approach potential clients: “Our view is that there should be an opportunity on the part of financial advisors to reach out on a one-time basis to communicate with individuals in an unsolicited way, to introduce themselves and to outline their services and, at the same time, request consent for further communication.”

With so many employers getting out of the defined-benefit pension plan business and the fact that the eligibility threshold for federal old-age security benefits will be raised to age 67, Pollock points out, “Canadians will become more and more self-reliant when it comes to planning for their financial futures. And they are going to need the advice of financial professionals. By closing this window, even this one-time window that we’re suggesting, it’s going to create an unintended consequence – that is, those Canadians that are the most vulnerable, who need advice, are not going to be getting it.

“It’s going to be this scenario in which the rich are getting richer,” Pollock adds, “because they’re already getting advice; they’re savvy when it comes to working with their financial advisors. And the poor are going to get poorer because those consumers with the greatest need will just not be reachable.”

Advocis plans to send another letter to Industry Canada outlining its concerns. “We may see another iteration,” said Pollock, who adds that the final revisions to the regulations may not be released until 2014. “That suggests that they are going to take some time to review the response they get by Feb. 4.”

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