This marks the reactivation of the comment process on the
proposal for a statutory best interest standard that the CSA
signalled in its December 17, 2013 status report following
consultation on CSA Consultation Paper 33-403 (Prior
Consultation Paper). In the Prior Consultation Paper,
the CSA proposed for comment the standard that 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,
(a) act in the best interests of the
retail client, and
(b) exercise the degree of care,
diligence and skill that a reasonably prudent person or company
would exercise in the circumstances.
The CSA has concluded that imposing a statutory duty on an
adviser or dealer to "act in the best interests" of
clients constitutes imposing a fiduciary duty.
The context for the Consultation Paper includes the fact the
U.S. debate on a uniform fiduciary duty for broker-dealers and
investment advisers remains unsettled. Staff of the U.S. Securities and
Exchange Commission (SEC) in 2011 recommended that the
standard of conduct for all brokers, dealers, and investment
advisers, when providing personalized investment advice about
securities to retail customers should be to act in the best
interest of the customer, but no regulatory action has been taken.
Under a separate initiative, the U.S. Department of Labor this week
released a finalized fiduciary rule defining who is a
"fiduciary" of an employee benefit plan under the
Employee Retirement Income Security Act of 1974
In Canada, as any investment fund manager (IFM) that has gotten
into a serious dust up with the CSA will know, an IFM has the
singular distinction of being subject to a statutory best interest
standard or fiduciary duty. Every IFM must (i) exercise the powers
and discharge the duties of their office honestly, in good faith
and in the best interests of the investment fund, and (ii) exercise
the degree of care, diligence and skill that a reasonably prudent
person would exercise in the circumstances.
There is a clear overlap between the policy concerns that the
best interest standard seeks to address and the recent CSA guidance
on "captive dealers" in CSA Staff Notice 31-343. As
the CSA and other regulators seek to achieve standards that are
"business model neutral", principles from the U.S.
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank) may inform
the debate on the captive dealer business model. Section 913
of Dodd-Frank provides that the sale of only proprietary or other
limited range of products by a broker or dealer shall not, in and
of itself, be considered a violation of the applicable standard of
care. In a study on the fiduciary duty of investment advisers
and broker-dealers, SEC Staff conclude that Section 913 and
other provisions of Dodd-Frank "also make clear that the
implementation of the uniform fiduciary standard should preserve
investor choice among such services and products and how to pay for
these services and products" including by preserving the
ability to offer only proprietary products to customers.
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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