As the deadline to comply with strict new rules for fee disclosures approaches, Canada's investment advisers remain locked in a stalemate with regulators over an appropriate timeline to enforce the changes.
For months, the Investment Industry Association of Canada, a lobby group that represents investment dealers and wealth managers, has pushed to delay a July, 2015, deadline to comply with new rules that will ultimately require advisers to clearly disclose the investment management fees their clients pay each year.
Despite IIAC's intense lobbying, regulators have yet to budge. In early December, the Ontario Securities Commission's Investor Advisory Panel, which operates at arm's length to the regulator, shot down IIAC's request for a six-month delay, arguing that any extension "is not justified and is not in the public interest."
Instead of backing down, the industry is now redoubling its efforts. Just before Christmas the group sent another letter to Canada's provincial securities regulators, again requesting an extension to comply with the new rules.
Initially, the regulators gave the industry three years to comply with the new client relationship rules, and staggered the implementation in three phases. Investment dealers argue this time frame was not long enough to compensate for such a sweeping overhaul of the way they do business.
The reforms are being made to what is known as the Client Relationship Model (or CRM2), and investment dealers are requesting a six-month extension for two main reasons: the complexity of the changes, and the best timing for the new fee reports.
"CRM2 is simple in its purpose and more complex in its multiple implementation phases than [updating] a few formulas and a couple of new fields …" IIAC wrote in its latest letter.
IIAC argues the revamp "affects a full gamut of applications, including core books and records systems; involves employees from almost every part of IIROC [Investment Industry Regulatory Organization of Canada] dealers; and most importantly affects every investment advisor and millions of retail investors."
The industry also argues that a July deadline is not in the best interest of clients, because sending out fee reports midyear could confuse them. Instead, IIAC argues mailing annual fee reports in January that look back over the calendar year would make the most sense.
"We believe investor interest is the most compelling reason to harmonize … implementation component delivery dates with the calendar year," the group wrote in its letter.
However, the latest comments from the Ontario Securities Commission's arm's length panel proves others don't always see it this way.
"While we understand industry's desire to provide the accurate, high quality client reports that investors need and will expect, we believe that further delay to achieve these objectives is not warranted," the OSC's Investor Advisory Panel stated earlier this month. "Canadian investors have waited long enough for disclosure of the costs and investment performance of their accounts."