The Canadian Securities Administrators (CSA) recently published
Consultation Paper 33-403 (Paper) which invites comment on
whether a statutory fiduciary duty should apply to registered
advisers and dealers (collectively, Advisers). The comment period
ends February 22, 2013.
Though undecided on the regulatory course ahead, the CSA appears
to be amenable to the introduction of a qualified statutory
fiduciary duty for Advisers.
The Current Standard of Conduct for Advisers and
Currently, the statutory standard of conduct under Canadian
securities laws, with the exception of Québec, does not
impose a fiduciary duty on Advisers. Rather, there is a duty on
Advisers to act "fairly, honestly and in good faith" with
their clients. The current standard also imposes certain
suitability obligations ("know-your-client" rules) and
various other principles-based and rules-based disclosure and
conflict of interest avoidance requirements.
While a fiduciary duty for Advisers is not currently imposed by
statute outside Québec, such a duty may nonetheless be found
to arise from the Adviser-client relationship in question, taking
into account the degree of vulnerability, trust and reliance of the
client and the level of discretion enjoyed by the Adviser and the
professional rules or codes of conduct to which the Adviser is
A Look Ahead
After canvassing recent international regulatory developments in
the area (Australia, the U.S., the U.K. and the E.U. have all
implemented, or are considering implementing, a qualified statutory
best interest standard), the Paper proposes for comment a qualified
statutory fiduciary duty for Advisers providing investment advice
to retail clients:
Every adviser and dealer (and each of their representatives)
that provides advice to a retail client with respect to investing
in, buying or selling securities or derivatives shall, when
providing such advice,
act in the best interests of the retail client, and
exercise the degree of care, diligence and skill that a
reasonably prudent person or company would exercise in the
This standard, the Paper notes, would have the following
a "retail client" would mean individuals with net
financial assets of $5 million or less and companies with net
assets of less than $25 million;
a retail client would retain complete discretion whether to
follow any advice received (an Adviser who disagrees with the
investment decision of a retail client and who has so advised the
client would have no further obligation to dissuade the client or
to refuse to facilitate an order);
the duty would apply only when an Adviser gives advice to a
retail investor with respect to investing and would not apply to
discount brokers who act only as order takers;
the duty would be an ongoing duty in the case of Advisers other
than exempt market dealers and scholarship plan dealers, and the
duty would terminate only upon the termination of the client
the best interest standard could not be waived by a retail
a retail client would be entitled to enforce the best interest
standard as a private law right of action; and
the existing suitability requirement would continue to apply to
Advisers and their representatives.
Under a new statutory best interest standard, clients could be
entitled to full disclosure of any material information and
Advisers might have to recommend investments that are in a
client's best interest, not only investments that are
The introduction of a statutory best interest standard would
also strengthen a client's common law remedy for breach of
fiduciary duty as it would eliminate the need to establish the
fiduciary nature of the Adviser-client relationship on a
case-by-case basis. The new statutory best interest standard is
unlikely to include certain overly-prescriptive features of the
common law fiduciary duty, such as the "no conflict" rule
or the "no profit rule." Accordingly, under a new
statutory best interest standard, conflicts of interest may
continue to be dealt with as currently provided in securities laws,
and the common law fiduciary principle that an Adviser cannot take
advantage of an opportunity learned of as a fiduciary (even if the
client cannot take advantage of that opportunity himself) would be
of limited application.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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