The Canadian Securities Administrators (CSA) publish welcome changes allowing for the registration of Advising Representatives as Client Relationship Management specialists
Today the CSA announced that they will allow firms to register Advising Representatives (ARs) as Client Relationship Management (CRM) specialists without requiring those ARs to have individual stock picking and research experience (stock-picking). The registration of CRM specialists will be achieved through nationally harmonized standardized Terms & Conditions (T&Cs). Information on the T&Cs setting out important context and expectations can be read in the CSA notice and the T&Cs are linked.
PMAC has been advocating for the ability to register CRM specialists for a number of years and we are thrilled with today’s announcement. The T&Cs present an efficient and practical solution to the challenge of registering ARs as CRM specialists and marks an important part of the CSA’s regulatory burden reduction initiative. Unrestricted AR registration requires stock-picking; however, the CRM specialist role does not involve the selection of individual securities for clients. It is important to note that there has been no change to the proficiency requirements to register as an AR. The T&Cs will be an important tool for firms, allowing them to divide responsibilities among registered individuals and streamline CRM activity and supervision processes. Importantly, the T&Cs will benefit investors by allowing firms to register CRM specialists with the skills to effectively communicate with clients.
CRM specialists will be able to conduct client intake, KYC and suitability analyses, recommend model portfolios and pooled funds, determine asset allocations, and formulate and draft investment policy statements, but will be prohibited from selecting individual securities for clients. CRM specialists may also review and approve the CRM-related activities of an associate advising representative (AAR) to create operational efficiencies within the firm.
The T&Cs impose certain other restrictions. To manage client expectations, CRM specialists must refer to themselves as such in all client communication and marketing materials and may not use a misleading title that would lead a client to believe the CRM specialist can perform the same advising activities as an unrestricted AR. CRM specialists are required to tell clients about the limited nature of the advice they can give and that unrestricted ARs will advise clients on stock-picking (for example, by selecting individual securities for client accounts on a discretionary basis).
The CSA have also clarified that AARs were not previously expected to have stock-picking experience and that this will continue to be the case, and that it will be permissible for a CRM specialist AR to accumulate stock-picking experience under the supervision of an unrestricted AR in a manner consistent with the T&Cs.
The CSA notice provides additional context and expectations for firms looking to register CRM specialists, including that standards for PMs’ internal controls will not be lessened simply because some ARs are registered as CRM specialists, and that no PM will be permitted to operate without at least one unrestricted AR. The CSA note they will monitor and review how PMs implement these T&Cs to determine whether any further changes are required.
PMAC wishes to commend the work of the CSA and, in particular, of Compliance and Registrant Regulation Staff, in arriving at a nationally harmonized set of standardized T&Cs.