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Présentation d'Advocis en réponse à la consultation sur l’Examen de 2006 de la législation du secteur financier du ministère des Finances Canada :  

Dans le cadre des consultations, les personnes intéressées peuvent faire des observations sur ce site dans les deux langues officielles ou dans la langue officielle de leur choix. Les observations affichées sur le site de Finances Canada le sont dans la (ou les) langue (s) dans laquelle (lesquelles) elles ont été reçues.

June 3, 2005

Gerry Salembier
Director, Financial Institutions Division
Financial Sector Policy Branch
Department of Finance
20th floor, East Tower
140 O'Connor Street
Ottawa, Canada
K1A 0G5

Dear Mr. Salembier:

Advocis is pleased to provide you with our comments on the Consultation Document for the 2006 Review of Financial Institutions Legislation, titled "An Effective and Efficient Legislative Framework for the Canadian Financial Services Sector".

Advocis, the Financial Advisors Association of Canada, is the country's largest association of financial advisors, representing 14,000 voluntary members. Our members are financial advisors licensed to distribute life and health insurance, mutual funds and other securities. Advocis members provide financial and product advice to millions of Canadians across a variety of distinct areas, including: estate and retirement planning; wealth management; risk management; and tax planning.

Our Association traces its origins to the founding of the Life Underwriters Association of Canada (LUAC) in 1906. Advocis continues an uninterrupted history of serving Canadian financial advisors, their clients, and the nation for almost a century. Advocis is committed to professionalism among financial advisors.

Our comments specifically focus on the three key goals identified in the Consultation Document: enhancing interests of consumers; increasing legislative and regulatory efficiency; and adapting the framework to new developments. Advocis recently published a conceptual framework for effective regulation of the delivery of financial services, and is working with industry representatives to further develop the concepts outlined in the paper. We are also consulting widely with interested stakeholders. Many of the issues which we highlight below are outlined in our Discussion Paper, A Framework for Effective Regulation of the Delivery of Financial Services in Canada, a copy of which is available at our website (www.advocis.ca). At this time many of our comments on the Government's Consultation Document will be of a general nature. We look forward to providing more detailed commentary following the Government of Canada's release of its policy proposals later this year.

Enhancing Interests of Consumers

Advocis supports the Government's commitment to providing a fair and balanced framework that preserves the health and strength of the sector and, at the same time, allows its evolution to benefit all Canadians. Moreover, we share the Government's view regarding the importance of ensuring that consumer rights are adequately protected. We are, however, concerned that the Government of Canada may be remiss in providing adequate protection in some areas, in particular, with respect to regulations governing tied selling practices by banks, the ability of banks to escape the application of licensing and other market conduct requirements otherwise applicable to the distribution of insurance products, and dispute resolution.

Tied Selling Practices

We note that the Government has yet to introduce regulations under s. 459.1, the tied selling provisions of the Bank Act, to more clearly define what constitutes undue pressure or coercion. We would encourage Department of Finance officials to move quickly to develop regulations which would clarify for consumers the types of behaviors which are not permitted.

Further, should the Government's policy recommendations for changes to financial institutions legislation include a relaxation of the current regime respecting bank distribution of insurance products, and in particular, banks' ability to promote or distribute insurance products within their branch network, we believe that consumer interests must remain paramount at all times, and that restrictions on banks' ability to engage in any tied selling practices which involve insurance products must be strengthened. In this regard, it is our position that any enhanced powers must be balanced against the potential negative impact on consumers, which may ensue when market opportunities are opened.


Regulations under s. 459.1 of the Bank Act be written to

  1. more clearly define what constitutes undue pressure or coercion;
  2. identify stiff penalties for those who contravene the tied selling provisions;
  3. prohibit the tied selling of any bank products with any insurance products for a period of two years from the date of coming into force of any new provision or changes to any existing provision of the Bank Act or Regulations having the impact of permitting banks to distribute insurance products in their branches.

Licensing and Market Conduct

Advocis is of the view that Canadians deserve the right to receive qualified and competent financial advice. Regulators strive to achieve this objective by regulating the individuals who distribute financial products through market conduct oversight, which often includes licensing requirements. The last decade has witnessed a remarkable shift in the level of consumers' needs as well as product sophistication. For example, what was once for the most part a risk management vehicle is today more frequently an integral piece of a comprehensive financial investment and planning strategy. Yet many Canadians receive offers of certain types of insurance products from non-licensed, untrained individuals.

Advocis believes that any sale of insurance, regardless of the type of product or the forum through which the product is placed, should be made by an individual duly licensed by a government or regulatory authority. Imposing mandatory licensing for all individuals selling any type of insurance product through any means of distribution will ensure that Canadian consumers are receiving qualified financial advice regarding complex financial products provided by informed and licensed professionals. In addition, mandatory licensing will assist in placing all financial advisors on equal footing, and will allow them to compete fairly in the marketplace, by creating a level playing field for all financial intermediaries and advisors distributing insurance.


Amend section 7 of the Insurance Business Regulations under the Bank Act such that no bank shall, in Canada, promote an insurance policy of an insurance company, agent or broker, or a service in respect thereof, unless the policy is promoted by an individual who holds a valid insurance license issued by a recognized regulatory authority.

Dispute Resolution

Advocis favours strong consumer protection measures in financial services which promote consumer confidence and growth in the sector. However, Advocis is of the view that there are a number of deficiencies in the current framework for the resolution of consumer disputes in the financial services sector. We have recently taken a leadership role in the industry with the development of a concept for a more accessible and more efficient dispute resolution mechanism for consumers of financial advice, as outlined in our Discussion Paper. We anticipate that implementation of this proposal will close some of the gaps existing in the current regime, such as the availability of an efficient and effective redress system for consumers of independent financial advice, and will finally bring under one umbrella consumers of financial advice from across the insurance and securities pillars.

Where our proposal differs from what currently exists is that it provides consumers with (a) a single access point for information and (b) the ability to deal with disputes for any type of financial product or advice. The consumer dispute resolution mechanism described in Advocis' discussion paper offers a transparent and streamlined process, which will significantly enhance consumer confidence in the financial services marketplace, while adding a high degree of accountability with the individual financial services intermediary.

Increasing Legislative and Regulatory Efficiency

In order to enhance consumer protection in financial services products and advice, a fundamental restructuring of the regulatory framework in Canada is required in order to significantly improve regulatory efficiency, which is at the core of Advocis' proposed Regulatory Strategy.

Financial Services Councils

As part of this restructuring, Advocis proposes the establishment of Financial Services Councils (FSCs), which are similar in nature to provincial insurance councils currently in operation in the Provinces of British Columbia, Alberta, Saskatchewan and Manitoba, but have significantly expanded scope to be the single licensing authority for all financial services intermediaries (insurance, mutual funds, securities, etc), with far-reaching powers to regulate all licensees. Under our model, the FSCs would house the consumer dispute resolution mechanism, outlined above.

Professional Body

Advocis believes that consumers are best served with independent-minded, professional advice. Consumers must have confidence in the advice and services that they receive. To achieve this goal all financial advisors who offer or hold themselves out as offering specialized or comprehensive financial advice to members of the public must hold a valid and recognized professional designation, among other professional requirements such as adhering to practice standards and codes of conduct, and maintaining meaningful continuing education. Advocis proposes the establishment of a national Professional Body, which would recognize existing designations for professional financial advisors. The professional body would set standards and codes of conduct and would have the authority to enforce compliance with such standards for professional advisors offering financial advice to members of the public. It would function in a manner similar to provincial law societies or colleges of physicians and surgeons, although it would be coordinated at a national level with provincial representation. Advocis would not be a party to the professional body but rather would function solely as a voluntary member industry association.

Single Securities Regulator

Another major element of the model is the establishment of a Single Securities Regulator for all securities transactions. As the International Monetary Fund rightly pointed out in its Report on its 2005 Executive Board consultations with Canada, while the financial sector was sound and well managed, greater regulatory efficiency could result in lower regulatory costs and Canada could better respond to the rapidly changing global environment by establishing a single securities regulator. Advocis supports the establishment of a single securities regulator. Under our proposal, this body would focus on the core responsibilities of a securities regulator, such as the raising of capital (initial public offerings, continuous disclosure, insider trading, accuracy of financial statements, etc.). The single securities regulator could be governed by a single, likely a federal enabling Act, and could coordinate activity and policy input across all provinces. The introduction of a single regulator would result in a more modern and efficient securities regulatory regime, and would bring Canada in line with all other major industrialized nations.

Adapting the Framework to New Developments

In this submission we make reference to a number of proposals which Advocis has outlined in its concept paper. The key drivers of our proposals for change in the financial services sector are: (1) consumer protection; and (2) enhanced regulatory efficiency. The Government of Canada was guided by similar objectives during its last review of federal financial institutions legislation, and we expect that a number of the areas under consideration at that time will be receiving considerable attention and debate during the upcoming review. One such area is the issue of expanded insurance powers for deposit-taking institutions. The Task Force on the Future of the Canadian Financial Services Sector identified serious concerns regarding the potential impact on consumer privacy and the possibility for tied selling abuses in its discussion of expanded insurance retailing powers. We believe that these concerns remain valid today. However, we also recognize that the industry has undergone significant change since the Government of Canada last considered the issue of expanded insurance powers for deposit-taking institutions, and we have indeed responded to the changing environment with our own recommendations for reform.

Advocis continues to oppose any changes to the current rules regarding insurance distribution by deposit-taking institutions within the current regulatory framework. We do believe, however, that upon acceptance and implementation of the recommendations outlined above, coupled with implementation of the concepts put forward in our Discussion Paper, the protection afforded by the current restriction on the ability of deposit-taking institutions to distribute insurance products, may no longer be necessary.

In closing, we appreciate the opportunity to provide you with our comments on the Consultation Document for the 2006 Review of Financial Institutions Legislation, and look forward to providing the Government of Canada with additional input on these important matters throughout all stages of its consultations. Should you have any questions and wish to discuss our submission, please do not hesitate to contact Steve Howard at showard@advocis.ca or the telephone number identified at the outset of this letter.

Yours truly,

Original signed by

Steve Howard, CA
President and Chief Executive Officer

Gary McLeod, CLU
Chair, Advocis National Board of Directors