Wealth Management in Canada Overview of the Regulatory Environment Susan Han September 13, 2014
Regulation of the Capital Markets What are the policy objectives? Facilitate the creation and movement of capital: efficient capital markets Deter fraud and punish fraudsters Protect consumers Promote confidence in the markets 2
Background to current reforms In the aftermath of the financial crisis: Inter-agency co-ordination to tackle systemic risk Banks to be better capitalized; higher capital requirements all round (i.e. reduce leverage) Increase transparency in the OTC markets (regulation of shadow banking ) Move more trading to regulated and supervised exchanges or electronic trading platforms Boost consumer protection measures including increased disclosure End TBTF: orderly winding-down of FIs Volcker Rule: No proprietary trading by banks 3
Macro Prudential Regulation Concerned with the safety and soundness of the banking and financial system A global and national concern Generally dealt with at the federal level 4
Individual Wealth Management Generally, individual or retail wealth management is regulated at the provincial level Securities regulation Insurance regulation Other retail financial services, for example mortgage brokers, payday lenders, foreign exchange dealers 5
Securities Regulation Two basic concepts in securities regulation Must be registered to deal or trade in securities, or advise with respect to securities No selling or distributing securities unless a prospectus has been filed, or there is an exemption available from the requirement to file a prospectus 6
Insurance Regulation Must be licensed in order to be able to sell insurance products (includes variable annuity products known as segregated funds ) Life agents are sponsored by lifecos Dual licensing is possible Insurance product is regulated federally under the Insurance Act 7
Who Regulates What? 8
Who are these folks? 9
Who Protects Investors? 10
Who else? 11
Other Products and Services Deposits with banks, credit unions and other similar institutions are not securities, and are covered by different regulation Mortgage brokers are regulated under separate Act and regime administered by FSCO Dealing in real estate is not regulated by securities, but can in some instances be an investment contract Financial Planning is not by itself regulated Transactions in digital currency (Bitcoin) not currently regulated 12
Trends to be aware of Disintermediation: direct to consumer is happening everywhere, including wealth management (the DIY investor; crowdfunding) Technology: the so-called Robo-advisor ; big data Regulatory convergence at the national and global levels Regulatory convergence and cooperation and coordination among agencies Whistle-blowing and offering bounties to whistle-blowers as a regulatory tool Recognition of the regulatory burdens faced by SME (Small and Medium Sized Enterprises) 13
Susan Han is a securities lawyer with Miller Thomson LLP in Toronto. Susan advises investment advisers, securities dealers, exempt market dealers. money service businesses and other financial services providers on their regulatory obligations, including securities compliance and registration matters. She has extensive experience dealing with investment funds, including public mutual funds and private pooled funds. Susan s compliance and regulatory practice includes advising clients on antimoney laundering, fiduciary and statutory obligations of investment managers, codes of ethics and personal trading, foreign corrupt practices, privacy, data security and data management, anti-spam legislation and compliance with U.S. Foreign Account Tax Compliance Act (FATCA). Before joining Miller Thomson, Susan was Senior Vice-President responsible for Legal, Compliance & Risk Management, Dundee Wealth and before that, General Counsel, Canada for Invesco Trimark. 416-595-8167 shan@millerthomson.com Follow Susan on Twitter @SusanJHan 14
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