Staff of the Canadian Securities Administrators (the CSA) and the Canadian Investment Regulatory Organization (CIRO) recently published an update to previously published guidance on the Client Focused Reforms – FAQs on the CFRs dated December 6, 2023. In the update, staff provided guidance on advisor ranking contests (see new FAQ #43). The guidance is substantially similar to guidance provided to registrants last July and published as an open letter from staff which we summarized in our August Bulletin. However, there is one notable difference.
In the new guidance, staff provides examples of what they consider to be client-facing interactions that the prohibition against misleading communications resulting from advisor ranking contests applies to. They include, but are not limited to:
- any marketing or client communications such as webpages or LinkedIn profiles,
- displaying an award or recognition in their physical or virtual office,
- displaying an award or recognition in their signature block (hard copy or electronic),
- mentioning the award or recognition to clients verbally in meetings,
- referencing the award or recognition in a media interview/publication, or
- emailing clients to tell them about the award or recognition.
As we noted in our August Bulletin – this is a call to action. Staff have issued a reminder of the meaning of the rules on misleading communications and that both firms and individuals are required to comply. In addition, staff have reiterated that registrants should take immediate steps to get into compliance or may receive a compliance deficiency in their next review.
What should you do to avoid a compliance deficiency in your next review?
While we included this in our August Bulletin, it’s worth repeating. If you haven’t already done so, you should:
- Review your policy on misleading communications and update it, if necessary,
- Clarify when an advisor ranking would be a misleading communication (for example, pay to play contests),
- Prohibit your advisors from participating in contests that would result in the publication of misleading communications,
- Remove, or require your advisors to remove, all rankings that would be considered misleading communications from all sites that are accessible to the public,
- Require advisors to request approval prior to participating in any business-related awards program so that the firm can conduct a review of the award program methodology prior to the advisor participating in the program, and
- Develop guidance on qualitative and quantitative criteria that would lead to advisor rankings that are not misleading and could be published by the ranking agency or included in external communications by the firm or wealth advisor (for example, best practices, compliance records, client retention and industry expertise).
December 21, 2023