The Consumers Council of Canada has written the Ontario Securities Commission and expressed the need to urge every investor, the investment industry, its regulators, and provincial and federal governments to read and respond to the research report produced on behalf of the Investor Advisory Panel of the Ontario Securities Commission entitled “Current Practices for Risk Profiling in Canada and Review of Global Best Practices.”
The report calls into question current methods to assess retail investment product suitability for consumers. The OSC research concludes that the current Know Your Client approach to suitability in Ontario “has resulted in an eclectic approach to risk profile evaluations.”
The report demonstrates to the Council’s satisfaction that the methods used to determine a consumer’s suitability to buy most common retail investments fail scrutiny, based on today’s knowledge levels. Therefore, a new, more rigorous way is needed to match investor needs with products. This new way will better take into account a consumer’s ability to tolerate risks embedded in a financial product’s design and purpose.
The review of global best practices in the IAP report reminds us that consumers are at risk across all elements of their balance sheets, absent uniform, strong, consistent and vigorously enforced regulation across all financial services, including insurance, loans and all manner of securities.  Federal, provincial and territorial governments should tackle the problems resulting from jurisdiction-based regulatory inconsistency, which can increase consumers’ risks and negatively impact them in any financial marketplace. Of course, this will not be easy, but needs to start now. A catalyst for reform could be a federal-provincial-territorial finance ministers meeting, at which elected representatives commit to such a course and direct the public service to pursue harmonization of strong legislation regarding consumer financial risk issues.
Meanwhile, the Council urges the OSC to insist the Ontario industry and its self-regulators prepare and present a proposal publicly within a year to 18 months to reform methods for determining investment suitability and urge other provincial-territorial regulators to do the same.