Thursday, 23 October 2008

Tell the Ontario Securities Commission What You Want Them To Do

The investing world doesn't seem to know it but the securities regulator in Ontario, the Ontario Securities Commission is collecting public input about retail investor issues. The OSC set up a body at the end of August 2008 called the Joint Standing Committee on Retail Investor Issues. Its terms of reference (only two pages!) are here. The JSC's first initiative was to conduct a survey on product suitability - see the questions on this page.

They need your help because they don't seem too skilled at getting out there and finding the run-of-the-mill retail investor. I had stumbled across their web page in September and sent them my two cents worth. They subsequently organized a teleconference to which I was invited along with, I presume, those other folks who had responded. There was a vast crowd on the call, all of twelve people (!) giving their views. Half or more were insiders or industry professionals. Somewhat sad and inadequate participation for such an important subject, I dare say. No one had really been informed that they were expected to give their views so it was quite off-the-cuff. As a result, there was a lot of rambling in the two hours. Sigh...

Here's a smattering of comments I heard (I make no attempt to be representative or comprehensive):
  • products need to have full disclosure of risks and costs before sale
  • advisors lack training and need a far higher level of education, practical training and experience
  • advisors are more motivated by sales commissions and fees than the client's best interests e.g. many advisors won't recommend ETFs
  • advisors may mislead by themselves not understanding the products they sell
  • some advisors put client money into investments that are highly inappropriate, both from the view of risk and client understanding, i.e. they ignore their fiduciary duty
  • the ABCP fiasco is an example of the failure of regulatory bodies to prevent the offer of a bad product and subsequent mis-selling by the industry
  • this OSC committee itself is in danger of bias and influence by part of the very industry it seeks to improve, e.g. through the fact that Mutual Funds Dealers Association is a member
While one can complain about poor regulation and a bad consultative process, just sitting back and bitching under one's breath does not and will not solve problems. It was written almost 400 years ago and is still true today: "If the mountain will not come to Mahomet, Mahomet must go to the mountain". Let them know what you want or think needs to be corrected. Send an email to by their deadline of Friday, October 31st.

A good place to start might be the new disclosure requirements for mutual funds, which blogger Michael James finds to be less than perfect. Btw, thanks to Preet Banerjee over at WhereDoesAllMyMoneyGo for bringing this subject to my attention.

I'm preparing my own comments for an email and will post them on this blog.

2 comments: said...

Thanks for the mention, and I will further point out that the link was provided to me by Ken Kivenko from Canadian Fund Watch (

I look forward to your open letter!

Michael James said...

Thanks for the link. My article that you pointed to contains a suggestion for disclosing fees to investors. However, I have no hope that it would ever be adopted because it would devastate the mutual fund industry. In my opinion, suitability of investment has as much to do with outrageous fees as it has to do with risk, but I doubt that many others would see it that way. If you think that a version of my idea might do some good if submitted, I'd like to hear suggestions for improving it or better presenting it.

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