Canada’s new self-regulatory body for the investment industry is seeking the authority to provide accreditation to individuals in Ontario who are licensed to sell securities or mutual funds so they can call themselves financial advisers.
On Monday, the New Self-Regulatory Organization of Canada (New SRO) – formed from the amalgamation of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) – announced it is working with Ontario’s financial services regulator to allow its members to use the title.
Financial advisers typically help clients manage their investments, and about 100,000 people work in that capacity across the country – though there are no legislated national standards for those who offer financial advice or financial planning for specific goals such as retirement or a child’s education. Outside Quebec, which has its own rules, anyone can call themselves a financial adviser, regardless of certification, designation or educational background.
Now, several provinces are looking to tighten up the rules to protect investors from unqualified individuals.
Ontario was the first province to pass legislation in 2019 under the Financial Professionals Title Protection Rule and has spent the past three years consulting on rule changes and designations. Saskatchewan passed its own legislation in 2020, and New Brunswick followed suit this month.
However, in late 2022, a group of investment industry organizations and consumer advocates became critical of the Financial Services Regulatory Authority of Ontario (FSRA), arguing that certain designations the regulator had approved – including some newly created ones – were setting low standards for financial professionals and putting Canadian investors at risk.
Organizations such as investor advocate FAIR Canada, CFA Societies Canada and the Financial Planning Association of Canada took aim, among other things, at the industry for allowing individuals who sell mutual funds to call themselves financial advisers.
Now, if approved, the New SRO will be able to grant accreditation to some 47,000 financial professionals in Ontario to use that title – including people who are only licensed to sell mutual fund investments.
“Accreditation through New SRO will maintain high proficiency standards and give investors’ confidence that they are dealing with qualified and committed financial advisers,” the chief executive of the New SRO, Andrew Kriegler, said in a statement.
The potential addition of the New SRO to the list of four credentialling bodies has pros and cons, FAIR Canada executive director Jean-Paul Bureaud said.
“On the one hand, when it comes to oversight and enforcement by a credentialling body, I expect the New SRO will do more to protect the investing public than some other credentialling bodies approved to date,” Mr. Bureaud said in an e-mail to The Globe and Mail. “Certainly, they have a demonstrated track record when it comes to protecting the public.”
But on the other hand, he said, the “fundamental problem remains the same – an investment adviser is not the same as a financial adviser.”
“I think there is a real risk that consumers may be misled into thinking they are dealing with someone who is providing them with broad-based financial advice, when the person is likely more focused on selling them a financial product.”
The New SRO is working with both FSRA and the Ontario Securities Commission to ensure its participation as a credentialling body will not result in regulatory duplication, including costs. FSRA will be proposing an amendment to its own fee rule that, if approved, would reduce the New SRO’s fees to recognize that the OSC already provides oversight of its activities.
Ontario’s rule changes, which came into effect in March, 2022, are being phased in over time. Financial planners have a four-year transition period (until 2026), while financial advisers were given a two-year time frame (until 2024).