Portfolio Managers Already Offer Best Investor Protection Through Fiduciary Duty


TORONTO, September 27, 2016 — Today, the Portfolio Management Association of Canada (PMAC) (www.portfoliomanagement.org) released its comments on the Canadian Securities Administrators’ (CSA) Consultation Paper to Enhance the Obligations of Advisers, Dealers and Representatives Toward their Clients. Read PMAC’s full submission here.

PMAC fully supports the CSA’s recommendation to introduce a nationally harmonized statutory fiduciary duty in securities legislation for all investment accounts managed on a discretionary basis. “In our view, investors in each province and territory who have chosen to have their investments managed on a discretionary basis should be afforded the same protections and remedies,” comments Katie Walmsley, PMAC’s President. The submission further notes that this legal “housekeeping” will be of little impact for registered portfolio managers or their clients, given that portfolio managers are already fiduciaries under common law as well as under statutory provisions in certain provinces.

PMAC, an investment industry association representing more than 230 investment management firms with assets under management of over $1.5 trillion, cautions the regulators against imposing other duties, namely a regulatory best interest duty that risks undermining and confusing what is already the highest standard of care in the industry. “The fiduciary duty is the gold-standard of care for investors,” Walmsley further remarks. “It is principles-based with a long and developed history of jurisprudence surrounding its meaning and application.” PMAC also notes that this regulatory best interest standard would not likely be adopted in all provinces and territories and this would cause more investor confusion by virtue of being a fragmented obligation, unevenly applied across the country.

PMAC’s paper also comments on some of the regulators’ proposed targeted reforms that are ultimately aimed at creating a more prescriptive regime with respect to how the investment industry interacts with investors. PMAC’s paper suggests that a one-size-fits-all approach to regulation will not be in the best interest of investors. The Association instead recommends a more tailored approach to reworking the existing regulation, taking into account the high legal and professional standards that are currently in place for portfolio managers, asks the regulators to recognize that these standards already fulfill the investor protection objectives of many of the CSA’s targeted reforms and propose some practical and investor-friendly alternatives.

PMAC Position on Recommendations Impacting Portfolio Managers:

  • PMAC supports the introduction of a statutory fiduciary duty in the securities legislation of jurisdictions that do not already have such a duty; this change will have little impact for portfolio managers, given that they are already subject to a common law fiduciary duty;
  • The proposed regulatory best interest standard is not as high a standard as the fiduciary duty and is therefore unnecessary. Additionally, the regulatory best interest
    standard would risk unneeded confusion and lowering the standard of care owed by portfolio managers due to the overlap of differing duties – all to the detriment of investors;
  • Focus should be on principles-based regulation for portfolio managers; a one-sizefits-all approach should be avoided; and
  • Given the high legal and professional standards already in place for portfolio managers, many of the targeted reforms are unnecessary, overly prescriptive and do not improve investor protection for clients of portfolio managers.

Other Recommendations:

  • PMAC supports statutory fiduciary duty for all registrants managing investment portfolios of clients on a discretionary basis;
  • All clients who have granted discretionary authority to an investment adviser should be afforded the same duty of care, regardless of the registration category of the adviser and the investor’s province of residence;
  • The regulatory best interest duty would not be adopted by all Canadian provinces and territories and would therefore result in a fragmented framework of obligations across the country;
  • The CSA has stated that the regulatory best interest standard will not be the same as the fiduciary duty and there is ambiguity and confusion as to how such a standard will be interpreted by the courts and regulators, causing uncertainty and confusion for registrants and investors;
  • Although PMAC supports raising the duty of care in the investment industry in the interest of investors, they are concerned that the lack of agreement among the securities commissions with respect to adopting the best interest standard could result in different standards of care in different provinces causing confusion for investors

About PMAC:
Portfolio Management Association of Canada (PMAC) represents more than 230 investment management firms that manage more than $1.5 trillion in assets. Members manage portfolios for private individuals, foundations, universities and pension plans. As one of the largest investment industry associations in Canada, PMAC operates coast-to-coast in English- and French-language markets. PMAC employs a collaborative information-sharing business model and advocates on behalf of its members to securities regulators and government agencies. PMAC represents investment management firms registered to do business in Canada as portfolio managers. The Association’s mission is to advocate the highest standards of unbiased portfolio management in the interest of investors served by members.


Katie Walmsley, President
Portfolio Management Association of Canada (PMAC)
Phone: 416-504-1118 x 204
Email: kwalmsley@pmac.org

Margo Rapport
Rapport Communications
Phone: 416-895-5672
Email: margo@margorapport.com