Acting on concerns of constituents and gaps in current financial advisory oversight, the Sudbury MPP is considering legislation to bring financial advisors under a consolidated set of consistent rules, establish a code of ethics governing the industry, and create a new administrative agency to effectuate compliance. The bill was introduced by Rick Bartolucci, a Liberal MPP from Sudbury, and it is said to address a number of current rules under the jurisdiction of various ministry offices which are viewed as neither consistent nor comprehensive and that may expose consumers to risk. Advocis, the 11,000-member Financial Advisors Association of Canada, supports regulation to bring consistency to the industry and championed the legislation.
Gaps in the current system allow persons not qualified or licensed to conduct financial advisory services, practices which expose consumers to risk and expose the industry to reputational damage and potentially unfair business practices. Currently, financial advisors may be registered with regulators overseeing separate sectors (brokerage industry, mutual fund industry, or insurance industry); however, the registration and administration of those regulatory agencies are not effectively interfaced to provide a broader view of practitioners. Essentially, a financial advisor banned in one sector could register and continue to practice under another.
From a broader standpoint, the Canadian Securities Administrators may seek federal rulemaking to oblige fiduciary responsibility for investment advisors and dealers. A fiduciary duty of care would require financial advisors to act in the best interest of clients when recommending products, assisting with financial decisions, and creating financial plans. It would also motivate advisors to forego products that may not be of principal benefit to the client, but be more beneficial to the advisor because of fees or higher commissions.
A significant part of the proposed legislation includes consistent and rigorous requirements in order for financial advisors to enter the field as well as stringent initial and on-going professional education. The new agency would have a role to administer registration, training, and practitioner oversight. In addition, it will investigate and resolve allegations of wrong-doing and, where necessary, take appropriate actions.