CSA Decisions Support Optionality in Industry
For Print Only Logo
Insights and Market Perspectives

CSA Decisions Support Optionality in Industry

Author: Blake C. Goldring

June 21, 2018

Earlier today, the Canadian Securities Administrators (CSA) announced a policy decision related to investor protections including the future of embedded commissions. The reforms are the result of extensive consultations by the CSA, as well as focused consultations conducted by the Ontario Securities Commission (OSC), with industry participants and investors.

We believe regular debate and consultation are a critical part of healthy capital markets. It’s a process that tests assumptions and ensures that regulations and oversight are in synch with rapidly changing technology and market innovation.

Today’s decision reinforces the CSA’s consultative approach and we are pleased that they thoughtfully considered input from across the industry, and of investors directly. The reforms announced today further align industry practices with the best interests of Canadian investors, while recognizing the enormous value of financial advice for Canadians and the need to maintain different compensation models to allow for the continued servicing of all client-types.

The CSA has proposed the following policy changes:

  • To implement enhanced conflict of interest mitigation rules and guidance for dealers and representatives requiring that all existing and reasonably foreseeable conflicts of interest, including conflicts arising from the payment of embedded commissions, either be addressed in the best interests of clients or avoided
  • To prohibit all forms of the deferred sales charge (DSC) option as well as their associated upfront commissions in respect of the purchase of securities of a prospectus qualified mutual fund (as defined in securities legislation); and
  • To prohibit the payment of trailing commissions to, and the solicitation and acceptance of trailing commissions by, dealers who do not make a suitability determination in connection with the distribution of prospectus qualified mutual fund securities.

AGF acknowledges and appreciates that the CSA’s mandate toward the protection of investors is of the utmost importance, and that the continued safeguarding of investors is a paramount standard for the investment fund industry to observe and be regulated within. Like the CSA, AGF upholds the principles that (i) investors should undeniably be protected against harmful risks associated with conflicts of interest; and (ii) investors should be fully aware of the compensation they pay to dealers and their representatives.

AGF believes that discussions related to advisor compensation should occur between an advisor and their client (as well as between an advisor and their dealer), and should be transparent. The introduction of new disclosure requirements back in July 2016 ensures that information about fees and other charges are clearly presented in every financial statement. These initiatives have undeniably increased the level of transparency in relation to investment fund fees, and made the associated disclosure more prevalent than ever.

The continuation of current industry compensation models demonstrates a recognition of the value of advice for multiple investor types and choice of compensation models that reflect the myriad of investors that are serviced by advisors. At AGF, we have always been committed to ensuring that our products are competitively positioned, structured to meet investor needs and stand on their own merit. We continually review our line-up to ensure we have the best representation of our strengths, while providing our clients with the choice and diversity needed to adapt to the evolving regulatory landscape. Including that of offering a wide range of product solutions with a variety of purchase options that provide advisors and investors with the opportunity to structure compensation in a variety of ways including embedded commissions, fee-based and fully negotiable options.

AGF, as it does today, will continue to operate within the framework dictated by regulators and will work closely with the regulators, our clients, investors and our dealer partners to navigate these policy changes effectively.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2018 AGF Management Limited. All rights reserved.

More articles like this.

Post-USMCA Business Conditions in North America

Reaching the elusive USMCA agreement allows our respective governments, regulatory authorities and business communities to turn their collective attention to the critical task of improving conditions to promote economic growth, job creation and business investment. And while reduced uncertainty is a great positive, important non-tariff barriers – namely, regulation and taxation – must be addressed, while also keeping a close eye on the implications of interest rate hikes.

Read More

IFIC Survey Gives Voice to Canadian Investors

AGF has always been a strong advocate for the value of financial advice, and these findings from Pollara Strategic Insights support previous research that demonstrates: Canadians who work with an advisor build more savings over time and are better positioned to meet their long-term investing goals. In fact, more than three-quarters (78%) of the surveyed investors specifically reported having better saving and investment habits because of their advisors.

Read More

U.S. job growth slumps, while Canada records highest job numbers this year

•The U.S. Labor Department released its official hiring and unemployment figures for September last week, providing the latest snapshot of the American economy. While 134,000 jobs were added last month. Wall Street economists had expected an increase of about 168,000. Meanwhile, U.S. weekly jobless claims fell to a 49-year-low, with initial claims for state unemployment benefits dropping 8,000 to a seasonally adjusted 207,000 for the week ended Sept 29, the Labor Department said.

Read More