The report indicated that the regulators are preparing final rule changes to eliminate the payment of trailers to discount brokers — a practice that is currently the subject of several ongoing class action lawsuits against industry firms.
The decision to put an end to fund companies paying trailers to brokers that don’t provide advice stems from a long-running CSA project to reform fund fee structures, which also resulted in the provincial regulators (with the exception of Ontario) moving to ban deferred sales charges (DSCs).
The DSC ban is slated to take effect everywhere but Ontario as of June 1, 2022. The Ontario Securities Commission is currently consulting on a series of restrictions on the use of DSCs, instead of an outright ban.
The entire CSA is also consulting on a proposed measures to address the risk of financial exploitation of seniors and other vulnerable investors. These proposals would enhance the ability of firms to place temporary holds on client accounts due to suspected abuse, and would require firms to get clients to name a “trusted contact.”
The CSA also reiterated its intention to strengthen OBSI, the industry dispute resolution service.
Investor advocates and an independent review have long called for OBSI to have binding powers, enabling it to require firms to pay compensation to harmed investors. Currently, it can only make recommendations, and has no power to enforce its decisions.
The CSA has yet to commit to providing OBSI with binding authority, but has repeatedly pledged to “strengthen” its powers.
Among a host of other initiatives, the CSA noted that it’s working with the Canadian Council of Insurance Regulators (CCIR) on a project to harmonize the cost and performance disclosure provided by both investment funds (such as mutual funds and ETFs) and seg funds.
The CSA also pledged to continue efforts to reduce needless regulatory costs with reforms designed to reduce compliance burdens for registered firms, investment funds and issuers alike.
Other ongoing projects include the CSA’s recently launched review of self-regulation, continued derivatives market reform, research into activist short-selling and efforts to develop a regulatory framework for crypto-asset trading platforms.
The report also noted that the CSA has been holding discussions with the RCMP’s Integrated Market Enforcement Team in an effort to improve coordination on securities-related white-collar crime cases.
“Faced with challenges created by the Covid-19 pandemic, our members responded swiftly and in a harmonized manner in support of investors and market participants alike. Despite such unprecedented events, we were able to stay the course in what we set out to undertake in the 2019-2022 business plan,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF).