At this rate, propaganda may be the OSC’s only effective plan….

Investor beware, in the absence of concrete regulatory change, the OSC may have to rely on gradually introducing an idea of investor confidence into your mind.

The OSC has just published its 2013/2014 statement of priorities.  It is bland, uninspiring and fails to make a firm commitment, either way, on the key issues of our day.  The OSC, once again, is preferring the warm fuzziness of further discussion and consultation to the realities of conflict and commitment.

Blithely ignorant of the increasing body of research that raises considerable doubt over the efficacy of disclosure, the OSC continues to rely heavily on this out dated remedy. 

Excerpts and brief comments:

….”the OSC does not expect these issues” (mutual fund fees and best interest standards) “to be fully resolved in 2013-2014”.

“The OSC is committed to developing a balanced and responsible solution that best meets the needs of investors and market participants. In 2013-2014 the OSC will complete its consultations on these issues and publish a document that includes an update of its consultation findings and identifies proposed next steps to address these issues.”

In other words, the OSC does not have a specific end in mind, and even if it did, a solution focussed on the client’s best interests is not going to happen.  Does this mean that the final solution will compromise these interests, to a certain degree?

The OSC agrees with the suggestion to support the Office of the Investor and provide the resources needed to provide additional focus and attention on seniors

Only additional focus and attention, but not the necessary standards! 

OSC Vision – To be an effective and responsive securities regulator — fostering a culture of integrity and compliance and instilling investor confidence in the capital markets.

To instil is to gradually introduce a feeling/idea into a person’s mind ((Oxford Encyclopedic English Dict. 1991).   I find it hard to classify this as a vision which investors should be comfortable with.  

Engage investors and investor advocacy groups, including the Investor Advisory Panel, through community meetings and outreach, such as the “OSC in the Community”, and focus groups to better understand investors’ key concerns.

Key concerns are already known: is this just yet more prevarication or have the OSC really insufficient information to press ahead with key improvements to regulation?   It is odd that this should be the number 1 priority for delivering investor protection in the current year.

Provide investors with more effective and meaningful disclosure:

  • a) Publish a rule requiring advisers and dealers to provide cost disclosure and performance reporting in client statements to investors and communicate progress on implementation
  • b) Publish final proposals for delivery of Fund Facts instead of a mutual fund prospectus
  • c) Develop a summary document for ETFs and consider mechanisms for delivery

Let us first ignore the fact that disclosure does not work!

Cost disclosure and performance reporting as is, is a step forward, but with no benchmarked performance it is going to be difficult for investors to even ask questions as to whether the investments they have been sold are in their best interests.   Fund facts are also woefully inadequate and fail to address key risk/return issues that should be part of an advisor’s decision making framework – high cost funds with poor risk adjusted performance profiles relative to their benchmarks can be sold with ease.  

Advance the discussion of mutual fund fees and fees for other investment products:


Detailed testing and research on investor preferences for mutual fund information have also confirmed that investors prefer to receive a concise summary of key information, including a simple explanation of expenses and fees, dealer compensation and investor rights.

Financial literacy research reinforces the need for clear and simple disclosure to not only help investors make investment decisions, but to facilitate investor protection.

Fund facts is indeed a simple explanation, but one which lacks meaningful and effective disclosure.  Great if you wish to sell a poorly performing investment.   Financial literacy research however raises considerable doubt over the effectiveness and validity of disclosure in the absence of best interest/fiduciary type standards.  The OSC neatly sidesteps this.

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