IFIC Urges Regulators to Adopt a Strategic, Fact-Based Approach to Reforms
Toronto, ON – June 29, 2016 – The Investment Funds Institute of Canada (IFIC) issued a statement today urging the Canadian Securities Administrators (CSA) to adopt a more strategic, fact-based approach to future industry reforms aimed at protecting investors. The statement was issued in response to a status report on the CSA’s ongoing review of mutual fund fees.
“The concerns that regulators cite as driving the need for further reforms – potential conflicts of interest and investor awareness of fees and performance – are already being addressed through a number of world-leading initiatives right here in Canada,” said Joanne De Laurentiis, IFIC president and CEO. “Furthermore the CSA is already consulting on significant targeted reforms that will further enhance the regulatory framework.”
It is incumbent on the CSA to: allow full implementation of current regulatory initiatives, including those related to enhanced disclosure (pre-sale delivery of Fund Facts and CRM2) and fairly assess their results; conclude consultations on enhancing the client-adviser relationship (best interest and targeted reforms); and determine next steps, before signalling that significant new reforms are needed. This is particularly so since a ban is being discussed for only one product out of the basket of financial options, ignoring the reality of Canadians’ investing habits.
Banning embedded commissions is presented as a solution to conflicted advice. Research commissioned by the CSA failed to identify any evidence that fee-based advice is any less conflicted than advice obtained through the payment of embedded fees. Furthermore, there is strong and mounting evidence from the U.K. that banning commissions hurts investors by eliminating access to advice and raising costs. These are consequences that we must not impose upon investors in Canada.
Banning embedded commissions will result in the CSA regulating fees, something it has historically been reluctant to do.
“It is important for regulators to consider the market forces that are reshaping and streamlining the industry to the benefit of investors,” added De Laurentiis. “Technology that will enable the automation of certain aspects of the business will contribute to lowering the costs of delivery, while the explosive growth of F-class series funds is providing investors with more fee-based pricing options.”
It is deeply troubling to the industry, as it should be to investors, that regulators do not appear to have a plan that shows how all of the recent and proposed reforms will fit together. “The regulators are taking the industry and investors on a bumpy ride without any kind of road map or even a clear or agreed upon destination,” De Laurentiis said.
The industry urges the regulators to re-consider this proposal before issuing their fall consultation paper.
The Investment Funds Institute of Canada is the voice of Canada’s investment funds industry. IFIC brings together 150 organizations, including fund managers, distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada’s savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canada’s mutual funds industry and its investors for more than 50 years.
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Senior Manager, Public Affairs