registrant. Under the current regulatory framework, if the OSC
desires to take action against a registrant and the registrant
disagrees, the registrant has an opportunity to be heard (OTBH)
to present their views in front of the Commission. Many
registrants cannot a;ord a lawyer and are unrepresented before
skilled adjudicators at the OTBH. Even as things stand today, the
record suggests registrants are unlikely to win an OTBH hearing.
On appeal, the standard of review in an Ontario court is very high
with a record of almost complete deference to the OSC. It is with
this backdrop that EMDs are legitimately apprehensive about the
implications of the BIS in a system that already seems not to
favour them. ;e registrant will always have to justify to the OSC
and courts that whatever they did was in the client’s best interest.
;at is a high hurdle. Given that regulatory or judicial review
typically arises when an investment doesn’t work out, it may be
practically impossible to overcome the hurdle.
16. CSA members often cite the US as an example of a jurisdiction
that is moving towards a BIS or its equivalency (the US Fiduciary
Rule). However, with the election of a new US Administration,
the current US President seems to be moving away from US
Fiduciary Rule. Recently, the US President prepared a presidential
memorandum that addresses the burdens of government regulations and the Department of Labor’s ;duciary rule. ;e presidential memorandum suggests the rule is a solution in search of a
problem. [bold added for emphasis] ;ere are better ways to
protect investors, and the current US Administration has directed
the US Department of Labor to review the US Fiduciary Rule.
;e intent of the US Fiduciary Rule may have sought to provide
retirees and others with better ;nancial advice, but in reality, its
e;ect has been to limit the ;nancial services that are available to
17. As stated in the presidential memorandum, the US President
does not intend to put unnecessary limits on economic opportunity. It states that the US Department of Labor exceeded its
authority with the US Fiduciary Rule, and this is exactly the kind
of government regulatory overreach the President says he was put
into o;ce to stop.
18. For additional information about the presidential memorandum, see the following:
a. See article titled “Trump Orders Review of Fiduciary Rule” at:
b. See also “Trump’s Memo on Fiduciary Rule” at:
19. For additional information about the BCSC’s position and
why it is against the BIS is set out in Schedule “A” attached hereto.
20. ;e PCMA recommends that the Ontario Minister of Finance
reject any OSC proposal to adopt the BIS for the reasons set out
above and maintain a registrant’s existing duty to act honestly, fairly
and in good faith as currently required under Ontario securities law.
Excerpt from the CSA Proposal
Reasons the BCSC is not Consulting on a Regulatory Best
;e BCSC strongly supports taking action to strengthen the
client-registrant relationship. Our objectives are to deliver better
regulatory responses, empower investors with better information
and improve investor ;nancial outcomes.
;e BCSC has considered the feedback from the Original Consultation Paper about the appropriateness of introducing a statutory
best interest duty. Together with the ASC, we [the BCSC] have
also supplemented that information by conducting our own
research and consulting with other experts. Further consultation
on a best interest standard is not warranted given the extensive
consultation already undertaken by the CSA and the work that has
been done since then to identify the investor protection issues and
craft targeted responses to them.
;e BCSC is proposing an alternative approach that in our view
will signi;cantly strengthen the standards of conduct, lead to
better investor outcomes and advance the best interests of
investors. ;e BCSC is of the view our priority should be focused
on consideration of the proposed targeted reforms only. Implementing speci;c requirements that deal directly with the identi;ed
issues in the client-registrant relationship will strengthen investor
protection and con;dence of investors in our capital markets.
;e adoption of a broad, sweeping and vague best interest
standard will create uncertainty for registrants and may be
unworkable in the current regulatory and business environment.
Introducing an over-arching duty called a best interest standard
while continuing to permit certain fundamental con;icts to exist
between registrants and their clients is not in the public interest.
Doing so may exacerbate one of the issues we identi;ed; the expectations gap between clients and registrants and may raise clients’
expectations about investor protection that may not be realized
under a best interest standard.
;e CSA should establish clear requirements for registrants to
follow and regulators and courts to enforce. ;e proposed targeted
BEST INTEREST STANDARD - THE CASE AGAINST (Cont.)
BRIEFING NOTE FOR THE PCMA’S PRESENTATION AT QUEEN'S PARK ON MARCH 9, 2017