Trends in Financial Services Regulations in 2022 and What to Watch For in 2023
Following crucial legislative and regulatory developments in the Canadian financial services space over the past several years, regulators focused in 2022 on bridging regulatory gaps, flushing out details and working towards operationalizing new systems and frameworks.
Financial title regulation was the subject of particular attention, with the objective of more effectively modernizing and regulating the use of the titles of Financial Planners and Financial Advisors in the financial services ecosystem in Canada. We also saw increased inter-regulatory cooperation between provinces but no uniform move toward a national regulator. There is a lot of work underway, and change is certainly ahead.
Financial title regulation
Ontario’s Minister of Finance approved the Financial Services Regulatory Authority of Ontario’s (FSRA) new Financial Professionals Title Protection Rule (FPTP Rule) as part of the framework under the related Financial Professionals Title Protection Act, 2019. It came into effect on March 28, 2022. Now that it is in force, the FPTP Rule establishes minimum standards regarding education, conduct and oversight for financial planners and advisors in Ontario.
A transition period will apply for any financial planner or financial advisor using the title on or before January 1, 2020. This transition period is four years for financial planners and two years for financial advisors.
The new regime relies on the direct oversight of financial planners and financial advisors by credentialing bodies approved by FSRA. Accordingly, many members of the financial planning and financial advising professions have watched closely as credentialing bodies have become approved. To date, approved credentialing bodies include FP Canada, the Institute for Advanced Financial Education (IAFE), the Canadian Securities Institute (CSI) and the Canadian Institute of Financial Planning (CIFP).
Saskatchewan’s Financial and Consumer Affairs Authority (FCAA) is continuing to work toward implementing its financial titling regime, with the most recent consultation period regarding proposed regulations having closed on September 20, 2022. Initially designed to mirror Ontario’s financial titling regime closely, the FCAA introduced several vital features that depart from the Ontario framework throughout multiple rounds of public consultation. These include different transition periods, additional baseline competency profiles for financial title users and further conflicts and suitability requirements.
New Brunswick also recently consulted on its own financial title protection regime and may join Ontario, Saskatchewan and Québec in imposing more significant requirements on financial professional title users soon.
Additional information regarding changes to requirements for financial title users can be found in Further steps taken towards financial title regulations by Osler Lawyers, Lawrence E. Ritchie, Haley Adams, Madeleine Blouin.
What to watch for in 2023
As regulators work to flush out the details of new mandates and transformative frameworks in the financial services regulatory space, industry participants and stakeholders can expect to see long-awaited modernization and gap-bridging developments begin to take shape in 2023.
There has been tremendous attention to Know Your Client (KYC) standards used in the investment and financial services industry to verify customers and know their risk and financial profiles. Three components of KYC include the customer identification program (CIP), customer due diligence (CDD), and enhanced due diligence (EDD). Know Your Product (KYP) and the operational rules and implementation effects for both dealers and advisors will continue to impact the financial services industry in 2023.
The final trend we see emerging in importance and forced adoption leading to more cost is – Know Your Advisor (KYA) – Distributors need to bulletproof their reputation and ensure advisors in their ecosystems are using the approved titles, are obtaining and maintaining the credentials and are meeting the continuing education requirements that reinforce the requirements of the accredited business issuing them.
It is unclear when these regimes will eventually become operational, but the trend toward formalizing consistent oversight over financial title users is apparent.
What are the implications
In an ever-shifting regulatory landscape, remaining compliant with the multitude of regimes governing the financial services sector is top of mind for financial services organizations – more than ever, the business and reputational risks of not doing so are far-reaching and significant.
Increased costs and resources will be significant without technology to automate and streamline workflows for operational efficiencies for everyone involved (Advisors, Management & Compliance). Inaction will be a costly and risk-riddled option.
Here is how we can help
The CE Records platform modernizes advisors tracking and management of continuing education to fuel their knowledge and expertise. The platform’s focus is to create collaboration within advisors’ teams and between the advisor and home office operations teams, management and compliance. We have automated through notifications. Formulated processes to help the advisors support their teams and streamline their workflow. Dealers and advisors can automatically understand where different actions are needed. The ability to provide personalized information specific to that advisor to have a collaborative conversation is essential.
The other foundational piece of the platform is to track and manage the multitude of regimes governing the ever-shifting regulatory landscape of continuing education in the financial services sector.
Our platform enables dealers and advisors to improve audit readiness, supervision duty, and reporting. Help decrease warnings, suspensions and fines by improving operational efficiency with automation, keeping firms and advisors organized to stay ahead of regulator trends and easily meet today’s and tomorrow’s needs.
Written by: Colin Henry, Founder of CE Records Inc.
CE Records is a software company that serves Canadian financial advisors’ needs to better track and manage continuing education credits. www.ce-records.com