Titles, Titles and More Titles – Notice of Changes and Request for Further Comment on Financial Professionals Title Protection Rule
On May 11, 2021, the Financial Services Regulatory Authority of Ontario (“FSRA”) proposed for a second time Rule 2020-001 Financial Professionals Title Protection under the Financial Professionals Title Protection Act, 2019. As a reminder, FSRA’s title protection framework is intended to mitigate consumer confusion and help provide assurance that persons providing financial planning or financial advisory services are qualified to do so through minimum standards for title usage. The proposed rule establishes approval criteria for credentialing bodies as well as approval criteria for those credentialing bodies to issue a financial planning and/or financial advisory credential to title users. The framework includes minimum proficiency, competency and knowledge standards for persons approved to use the titles through the credentialling requirements, but will not amount to a new licensing regime nor regulate individual conduct. In the framework consultation summary report containing responses to comments made on the original August 2020 consultation, FSRA notes its intention to include SROs as credentialing bodies under the framework and confirms that the framework is not intended to introduce new conduct standards for firms registered with IIROC or the MFDA.
FSRA has also proposed guidance with respect to its supervision approach, and revised guidance on its approach to administering applications. Several amendments were made to the application guidance, including with respect to the approval criteria for a credentialling body and also to specifically require applicants to show their policies and procedures with respect to real or perceived conflicts of interest. Additional expectations are also set out with respect to the curriculum of credentialing bodies, such as a specific requirement for the financial advisor curriculum to provide an understanding of standard retail investment products and how they should be viewed with respect to other areas of financial advice. Its approach to supervision will include annual reviews of approved credentialling bodies. FSRA also expects that credentialing bodies will share information with other such entities to ensure that only qualified persons obtain and keep an approved credential (and don’t credential-hop). Further, FSRA expects that credentialling bodies will have a process in place to review the good standing of their own credential holders in the event regulatory action is taken by another credentialing body or regulatory body.
Of specific interest to current title holders, the title restrictions extend to those titles that could be reasonably confused with the title of financial planner or financial advisor. Many commentators asked for additional clarification and examples of confusing titles. An appendix to the draft supervision guidance now provides examples of both titles that FSRA considers could reasonably be confusing and those that would not likely be confused with the title of financial planner or financial advisor. We expect this list to be the subject of new comments during this consultation period.
It is also proposed that credentialing bodies provide FSRA with the information that will be posted on their websites with respect to individuals and their credentials, as well as any disciplinary action taken against such individuals, in order to allow FSRA to create a central registry of credential holders. The formation of a central registry was suggested by a number of commentators on the original proposal.
In the notice accompanying the proposed rule, FSRA has set out for the first time its overview for its intended collection and remittance of fees, for which a separate consultation will be launched in the next few months. FSRA is currently proposing a framework that would include a fixed application fee ($10,000 for approval of a credentialing body and $5,000 for each application for approval of a credential) to recover direct costs of reviewing such applications. Each credentialing body would also be subject to an annual fee in order to help FSRA recover its annual oversight costs, as well as its start-up costs to implement the title protection framework. Such costs would be recovered through a mixture of fixed annual fees of $25,000, variable fees based on each credentialing body’s number of credential holders, as well as a third amount related to recovery of start up costs over a five-year period.
It is specifically noted that FSRA will have a process to review and adjudicate complaints against persons using a financial planner or financial advisor title without an approved credential, as well as complaints against the credentialling bodies themselves. The transition period for persons utilizing the title of financial planner or financial advisor without a recognized credential has been shortened to four years for the financial planner title and two years for the financial advisor title (from the date the rule comes into force, and only if the title was already in use as of January 1, 2020). Comments on the proposed rule and related guidance are due June 21, 2021.
If you have any questions on the impact of these proposals on your business, please contact your usual lawyer at AUM Law.
May 31, 2021