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Some advisors have been pushing for changes to the outside activities rules, which have been cumbersome to those who volunteer in their communities.ridvan_celik/iStockPhoto / Getty Images

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Changes to rules from Canadian securities regulators around how advisors disclose the activities outside of their day-to-day work will create an easier and more thorough registration and oversight process for registrants, according to some members of the investment industry.

The updates are part of the final amendments to registration-reporting requirements the Canadian Securities Administrators (CSA) published in mid-December. They include a new framework for reporting outside activities to regulators, including disclosing those considered “positions of influence.” It also extends certain reporting deadlines to notify of changes in registration information from 10 to 15 or 30 days, depending on the category.

The amendments add a new requirement to report the business titles and professional designations that registered firms and individuals use. The title disclosure requirement follows new rules that took effect on Dec. 31 as part of the client-focused reforms (CFRs) for advisors to use titles such as “vice-president” or “director” only if they hold the title office.

The new rules are set to take effect on June 6, and registrants have up to a year to update their information.

The CSA says the changes will streamline the registration information process, saving registrants time and money, and give regulators the information needed to do their jobs and protect investors.

“The ultimate objective of all of these changes is for financial consumer protection,” says Jackie Sanz, managing director of the risk and compliance solution at global consulting firm Protiviti Inc. in Toronto.

Ms. Sanz says these final amendments are more focused on regulatory disclosures versus the broader operational changes that came with the CFRs.

For example, with the outside activities’ amendments, regulators organized disclosures into categories with more clear examples of what needs to be disclosed and elaborated on the “position of influence” category, Ms. Sanz says.

“They have added some guidance on it and acknowledged that ‘positions of influence’ really are a matter of judgment, based on facts and circumstances in each unique case,” she says.

Ms. Sanz adds that the existing rules were seen as a barrier for some advisors who want to volunteer in their communities.

“There has always been a gray area in the industry about certain volunteer positions, or community, cultural or religious type of organizations that one might be involved in,” she says. “What they have made clear is that those types of positions of influence are not what they are intending to capture.”

How new rules address reporting outside activities

Jason Pereira, a partner and senior financial consultant at Woodgate Financial Inc., a financial planning firm under the IPC Securities Corp. umbrella in Toronto, has been pushing for changes to the outside activities rules that have been cumbersome to advisors like him who volunteer in the community.

“The principle of consumer protection is the most important thing,” he says, but he believes the current registration for outside activities is “an overreach” and the new revisions should address it.

“Anytime you do something outside of your normal job, you have to report it,” he says.

For example, an advisor’s ability to volunteer for a community organization was something being denied due to “undue influence,” Mr. Pereira says.

“The problem is, when you cast a hugely wide net like that, you get a lot of stuff that we really shouldn’t be bothering with. Everything was principles-based, not prescriptive.”

Mr. Pereira is also in favour of the change to force registrants to disclose titles – and believes ones like “vice-president” and “director” were often misused.

“For years, the industry has gotten away with handing out the term ‘vice-president’ like it was candy,” he says. “It’s deceitful because, at the end of the day, when the average person hears a person is a ‘director’ or ‘vice-president,’ they think of someone who has actual control over the direction of a business.”

Changes should get rid of ‘a lot of errors’

Janine Guenther, president of Vancouver-based Dixon Mitchell Investment Counsel, says her firm has updated some of the titles among its staff to reflect the changes that took effect at the end of 2021, and has no issues with disclosing them as the new CSA amendments require.

For example, some people who had the “director” title are now a “national lead” or an “investment counsellor,” she says.

Ms. Guenther is also in favour of the CSA’s “modernization and clarification” of outside activities and the extended timeframes for reporting information as required.

“[The changes] are more reasonable and should get rid of a lot of errors, including people recording it incorrectly or not at all,” she says.

“We just have to be more organized,” in how that information is reported, she adds, because “there is a fine line in our business between our professional activities that are personalized.”

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