Is Investor Advocacy in Canada at a crossroads?

I wonder if anyone noticed how both the OSC’s Investor Advisory Panel’s and FAIR Canada’s submission on best interests standards appeared to distance their respective bodies from earlier more explicit support of fiduciary duty for advisory based financial services.

With respect to FAIR

From their recent Best Interests submission p23: 

“FAIR Canada supports the requirement to act in the client’s best interest rather than a fiduciary duty. “

From an earlier FAIR posting:

FAIR Canada has long advocated for a fiduciary or best interest standard in Canada for financial client-advisor relationships. FAIR Canada commends the Institute for the Fiduciary Standard for the Fiduciary September and Fiduciary Declaration initiatives. FAIR Canada continues to urge policymakers and regulators in Canada to move forward with the imposition of such a duty to protect Canadian investors.

And here –

And the IAP’s submission:

In past communications this panel has recommended that Ontario securities law should be amended to ensure that financial service providers are bound by a fiduciary duty to their clients. We acknowledge that careful thought will need to be given to the precise definition of a best interest standard.

It is odd that the only reference to Fiduciary duty is that noted above.  Odd in the sense that fiduciary type duties are central to best interest standards and expectations, and that both the IAP and FAIR have in the past promoted Fiduciary standards, yet both appear to be backing off without clear explanation as to why. 

In its 2011 Annual report, the IAP made the following statement

The Panel called for the priorities to be amended to include the following three key priorities: fiduciary duties for financial service providers; improvement of point of sale disclosure and its extension to comparable investment instruments; and restitution for investors.

However, regarding fiduciary duty, we note that the Commission is committed to “research” rather than a commitment to moving towards implementation. Admittedly, this issue has not been much discussed in Canada, although it has been the subject of full-fledged debate and considerable progress in the U.S., the U.K., Australia and other developed markets. The Panel is concerned that a prolonged process of studying risks leaving Ontario investors less well-protected than their counterparts in international jurisdictions.

We support the implementation of an explicit fiduciary obligation for all advice-giving financial professionals/salespeople;

I do find the above interesting!  If the two funded and regulator sponsored investor advocacy “entities” are turning their backs on fiduciary type duties, then I think it is reasonable that this be clarified.   

With respect to the IAP, I was wondering if the ostensible backtracking has something to do with the dominance of members with past and present industry/regulator ties (4 out of 7 members).  

A failure to properly understand and push for the introduction of fiduciary type duties for services that promote themselves as being clearly advice led is a failure of investor advocacy in Canada.  

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