Fiduciary Duty/Best Interest Standard
What exactly is a fiduciary duty? What do we mean by the term “best interest standard?” What is the difference between a statutory (legislated) standard and one based on common law? What does it all mean to the investor? To the advisor? To the industry?
The question as to whether Canada’s regulators impose strict enough expectations on advisors is under active review and debate.
As a minimum, all advisors are required “to deal fairly, honestly, and in good faith with clients.” They are required to “observe high standards of ethic and conduct in the transaction of business with clients.” Extensive regulations by securities commissions and self-regulatory organizations impose strict rules around:
- Proper disclosure and conflict of interest
- Prohibited sales practices
- Supervision of activity in clients accounts
- Advisor background checks (police, credit, employment, education, proficiency)
- Education requirements
- Insurance and bonding.
The industry’s regulators are rigorous in their oversight and enforcement. Investors who believe their advisor has not served them well have access to a robust dispute resolution process at no cost. In rare cases when the dispute resolution process cannot address the complaint, legal recourse is available through the courts.
Each advisor/investor relationship is unique, with different levels of knowledge, reliance and decision-making. As an industry, we believe the system is best able to accommodate this wide variety of relationships, serving both investors and the advisory community well.