On November 16, The Ontario Securities Commission (OSC) published its proposed Statement of Priorities for 2024-2025 year. One of the key priorities include the OSC’s focus on the implementation of the Client Focused Reforms (CFRs). The excerpt below highlights the details of the proposal, including the actions and planned outcomes by the OSC.
#4 – Assess implementation of Client Focused Reforms and Consider Impact of Limited Product Shelves
In August 2023, the CSA and CIRO published joint Staff Notice 31-363 Client Focused Reforms: Review of Registrants’ Conflicts of Interest Practices and Additional Guidance, a report on its sweep to determine the level of understanding and compliance with the conflict of interest provisions of the Client Focused Reforms (CFRs).
All material conflicts of interest are required to be identified and either avoided completely or their impact mitigated in the best interests of a firm’s clients. As we have previously stated, additional measures will be considered if the CFRs are not attaining the desired outcomes for investors. Additionally, we are concerned about what impact predominantly proprietary products shelves may have on client outcomes (e.g., higher fees and inferior performance) and other possible negative outcomes may result if financial institutions offer predominantly proprietary products and independent products are not readily available for investors and their advisors to consider.
Actions in 2024-2025 will include:
- Conduct further investigation, in conjunction with CIRO and the CSA, to consider the shelf formulation approaches taken by registrants and the decisions to rely on predominantly proprietary products
- Conduct additional CFR sweeps, in conjunction with CIRO and the CSA, to determine understanding and compliance with the Know Your Client, suitability and Know Your Product requirements of the CFRs and communicate the outcome to stakeholders.
- Heightened awareness by firms of their CFR obligations including consequences for identified deficiencies
- Consideration of the need for additional measures to protect the goals of the CFRs and to enhance the competitive landscape for investment products.
As the regulatory environment intensifies, many firms, including those with proprietary investment products, may wonder how technology can help comply with requirements and grow their wealth practice. Since 2018, InvestorCOM has collaborated with leading wealth firms to meet CFR requirements, including proprietary shelf practices.