OSC Compliance reviews….we need enhanced KYC information standards.

The OSC does not regulate investment and financial advisors who are mainly regulated by IIROC/MFDA.  Many of those who are regulated by the OSC are actually held to higher best interest standards (portfolio managers, investment counsellors and fund managers). 

What continues to surprise me is that advisers that are held to supposedly higher best interests standards are continuing to be regulated under the much lower KYC information standard.   Some advisors continue to delegate fact finding and suitability profiling to advisors who are regulated by the transaction or who have little or no investment expertise.

“We continue to be concerned about the practice by some PMs of delegating their KYC and suitability obligations to referral agents such as mutual fund dealing representatives and financial planners. We detailed our concerns in previous annual reports and set out a list of suggested practices for PMs. Despite this, some PMs are still delegating their KYC and suitability obligations to referral  agents. In the future, we intend to respond to this type of conduct more aggressively, for example, by recommending a suspension of registration or by referring the matter to our Enforcement Branch. “

Anyone who has ever managed money knows that it is very important for the adviser to be able to place the client’s risk/performance preferences and financial demands within the adviser’s portfolio universe.  

The KYC process needs to have a direct relationship with the manager’s own processes and disciplines and information requirements.  Otherwise suitability has not been given life.  Furthermore, the limited information component of the KYC is insufficient to structure, plan and manage portfolios to meet the often differing personal demands of a given client’s (s’) financial situation.   A great many PMs already operate at far higher standards, so why not raise the minimum?


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