Quebec is aiming to modernize and streamline its financial sector framework with Bill 92, introduced last month, but some industry groups say they need more time to evaluate the legislation. The bill would merge two of the province’s self-regulatory organizations (SRO) and transfer the supervision of mutual fund representatives to the Canadian Investment Regulatory Organization (CIRO).
The bill’s proposals would combine the Chambre de la sécurité financière (CSF), which currently is responsible for mutual fund rep supervision, and the Chambre de l’assurance de dommages (ChAD), which oversees property and casualty insurance representatives. The new organization would be called Chambre de l’assurance.
Industry organizations and consumer advocates say there’s been a lack of consultation and notice regarding the changes, and raised doubts whether it will strengthen consumer protection.
In a release, the Association professionnelle des conseillers en services financiers (APCSF) said it was shocked that Quebec is proposing a major reform “without any consultation having been conducted with the main stakeholders: the professional advisors themselves.”
“[Autorité des Marches Financiers] officials piloted this reform in a vacuum, bypassing any form of democratic dialogue,” APCSF said. “Their objective was clear: to weaken professional supervision — which has served Quebec so well for over 25 years at no cost to taxpayers — to better satisfy the pressing demands of financial industry lobbies: banks, brokers, credit unions, insurers, etc.”
The bill will result in “a proven, member-funded, transparent system rooted in Quebec being replaced by a regulatory ‘lobster cage’ where large pan-Canadian financial groups will control the chain of supervision of financial services,” according to APCSF.
It contends the bill cements “the stranglehold of commercial interests on public protection.”
“By eliminating codes of ethics, independent disciplinary mechanisms and
peer self-regulation, it opens the door to the deprofessionalization of all Quebec financial advisors,” the APCSF said.
By removing the CSF’s oversight of mutual fund reps, the bill “fragments the framework by increasing regulatory confusion on the ground and weakening the involvement of professionals, the true experts in savers’ needs,” it said.
“No fewer than 23,000 of Quebec’s 34,000 financial advisors would find themselves supervised by a private organization based in Toronto, whose members are the financial institutions’ brokers themselves. The other part would be attached to a new, toothless organization, created by the [AMF], without any real power or autonomy,” the letter reads.
Very different professions
Sylvain De Champlain, chairman of the CSF board of directors, also has reservations about the merger of the CSF and ChAD.
“In doing so, the government is bringing together very different professions: personal insurance, financial planning and property and casualty insurance,” he said, at the organization’s annual general meeting on May 8. “Moreover, by moving these pieces within the financial ecosystem, many connections and functions risk being weakened, if not broken.”
The CSF presented its position to the National Assembly’s Public Finance Committee on May 20.
According to CSF’s letter, the transfer of 21,909 representatives to CIRO would put an end to a successful continuing education model unique to Quebec, with less stringent requirements set by the national regulator.
The bill’s reform “would considerably complicate the situation of representatives holding multiple titles, who would be subject to separate rules and supervisory bodies. This loss would be detrimental to consumer service, particularly in the regions.”
In the CSF’s view, the proposed reform introduces far-reaching legislative changes that have been insufficiently assessed.
Bill 92 would deprive the CSF of more than 40% of its current revenues (approximately $6.4 million on a recurring basis), which will inevitably lead to a reduction in services for the public and members, it said.
One-stop shop
The Securities and Investment Management Association (SIMA) supports the changes. In a release, SIMA said the reforms would create a one-stop shop that would promote enhanced ethical oversight and greater consistency in the continuing education of representatives. It also said the changes would increase the efficiency of the sector.
The existing model “imposes considerable limitations that are likely to harm investor protection,” it said.
For example, the CSF does not involve brokers in its investigations, said SIMA. “Since [CIRO] oversees both brokers and [reps], their approach during an investigation into a representative is to involve the broker and take the opportunity to validate the measures in place to prevent fraud and regulate their practices,” reads a translation of the brief signed by Marie Brault, chair of the board of governors, SIMA Regional Council in Quebec.
According to Brault, a single body also helps avoid misunderstandings and confusion between CIRO and the CSF.
ChAD, meanwhile, says the merger of the two organizations into a private non-profit organization will remove a “clear legislative anchor” that other organizations, such as the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ), a real estate brokerage SRO, benefit from. “This imbalance is all the more worrying since the OACIQ retains all of its legal foundations and is granted additional powers under Bill 92,” ChAD said in a brief.
Why deprive the sector of an equivalent legislative framework and “thus reduce the level of public protection?” it asked. “In order to maintain public protection, it would be essential to keep the Chambre de l’assurance de dommages within a legislative and regulatory framework” and to ensure “public protection remains at the same level as it is currently.”
More consultation
Christian Corbeil, CEO of consumer protection non-profit Option consommateurs (OC) said that although there are positive changes in the bill, more consultation is needed.
“All visions should be listened to. Here, a total reform is being proposed … without any in-depth consultation. It’s very rushed,” he said. OC has also submitted a brief on the bill to the National Assembly’s Public Finance Committee.
Corbeil said he is pleased that the bill strengthens the AMF’s sanctions regime and expands the consumer compensation regime. However, he fears that the reform will not improve consumer protection overall.
“There are structures established in Quebec for several decades that work and can be improved,” he said. “Why move towards another model that aims for harmonization [with the rest of Canada]? We don’t know if the model will be better. Are we talking about a possible levelling down? It’s likely.”
The quotes and statements in this story have been translated from the original French, and were originally published in our sister publication Finance et Investissement.