Geller Law
In the world of finance, regulations play a crucial role in maintaining trust and integrity. A case we were involved (at our former firm), Young v. RBC Dominion Securities, highlighted the importance of these regulations. The case involved the Court assessing the duties of a financial advisor towards their client.
The Court reviewed various materials, including the IDA regulations (now known as CIRO regulations) and the Canadian Securities Institute Conduct and Practices Handbook. These documents set minimum standards that a financial advisor must meet. The Court also noted that if a financial advisor violates these standards and causes damage, they can be held liable.
An interesting point made by the Court was the distinction between financial planners and investment advisors. They highlighted that financial planners handle the client's overall financial planning, while investment advisors have a more limited role. The extent of the advisor's involvement in selling securities or managing investment funds can influence the applicability of these regulations.
The Court in Hunt v. TD Securities Inc., further emphasized the role of professional rules or codes of conduct. These rules can influence the standards set by the Court for acceptable behaviour in the profession.
The Canadian Securities Association, which all provincial securities regulators are part of, provides "National Instruments" to ensure consistency in securities regulations across Canada. All provinces and territories in Canada have now adopted National Instrument 31-103, which provides standardized rules for registering investment managers, dealers, and advisors.
There's a strong connection between the Canadian Securities Association and IIROC. NI 31-103 even states that if an IIROC membership is suspended or revoked, the member's registration with the provincial securities regulator is also suspended.
However, one aspect of the regulatory regime that judges have criticized is the complaints procedure/protocol. For instance, if a member's IIROC membership is suspended, their registration with the relevant provincial regulator will also be suspended. However, for advisors not subject to IIROC, enforcement of the regulations might not be as strict.
The Financial Advisors Association of Canada, also known as Advocis, is an industry-based advocacy group that operates under the name "Advocis". They provide training and certification programs and have a Code of Professional Conduct. All members agree to abide by this code, which includes guidelines on acting with integrity, competence, diligence, and in the client's best interests, among others.
In the case of Dyer v. Cunningham, the defendant financial planner admitted to breaching the code of professional conduct after a complaint to the Financial Advisors Association of Canada. The Court expressed its dissatisfaction with the "complaints procedure and the apparent lack of transparency and accountability in that procedure". The Court seemed unhappy that no action was taken against the defendant by the Association despite the admission of a breach of professional conduct.
In conclusion, the role of financial regulations in maintaining trust and integrity in the financial sector is undeniable. The case of Young v. RBC Dominion Securities and other related cases underscore the importance of these regulations and the need for continuous improvement in the regulatory process.
