Financial Professionals Title Protection Framework Second Consultation Summary Report

Following feedback received as part of the first public consultation, FSRA amended the proposed transition periods for title users from:

• Five (5) years to four (4) years for FP title users; and
• Three (3) years to two (2) years for FA title users.

The majority of stakeholders responding to the consultation supported reducing the transition periods.

As proposed in the FPTP Rule, individuals who were already using the FP or FA title prior to January 1, 2020 are permitted to continue to use the titles for the duration of the proposed transition periods. Some stakeholders raised concerns about the inclusion of the January 1, 2020 date, and the number of new title users who may not be permitted to utilize the transition provision. Some stakeholders suggested choosing a date that is closer to the date that the FPTP Rule will take effect.

Some stakeholders raised the concept of disclosure by title users during the transition period and the added benefits for consumers. For example, stakeholders suggested that individuals should be required to identify that they are utilizing the transition period by using the FP or FA title in conjunction with “candidate”, or another qualifier.

• The transition provision is intended to provide certain individuals a sufficient amount of time to obtain an approved credential.
• The revised transition periods will reduce the time in which individuals who do not hold an approved credential can continue using the FP/FA title and will minimize the need for a disclosure requirement.
• The January 1, 2020 date is intended to clarify who can benefit from the proposed transition periods.
• FSRA will provide a further update on transitions in due course.  

One stakeholder suggested that FSRA should develop a standard code of ethics, which would be adopted by all approved CBs and potentially used across multiple jurisdictions.

Several stakeholders supported a FSRA requirement for a CB’s code of ethics to include a provision to put the client’s best interest first.

• Through the application process, FSRA will assess the extent to which a CB has met the minimum standards for approval.
• To support consumer protection, the Application Guidance has been amended for CBs to include a requirement for credential holders to put the client’s interest first in relation to making a recommendation.

Stakeholders expressed concerns that the proposed framework would lead to parallel complaint handling should a credential holder hold more than one approved credential. It was suggested that simultaneous complaint handling could lead to negative outcomes for consumers. Some stakeholders suggested that FSRA require CBs to defer complaint handling to regulatory bodies, in the event that an individual also holds an approved credential issued by a regulatory body.

Several stakeholders expressed concerns with sharing of information between CBs at the complaints stage (as this could present challenges with an organization’s responsibilities under existing privacy legislation), and that information should only be shared following the commencement of a formal disciplinary action.

One stakeholder highlighted that, should the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) be approved as CBs, there is the potential for confusion as to whose standards apply with respect to which activities and which entities would have responsibility for enforcement.

• Information sharing between CBs is an important element in ensuring that CBs are well placed to assess the ongoing good standing and suitability of credential holders.
• As per the proposed Application Guidance, CBs should demonstrate that they have processes and procedures with respect to sharing information among approved CBs and regulatory bodies.
• An approved CB’s complaint handling process is also an important framework element, which will help ensure fair outcomes for consumers.
• FSRA has amended the proposed Application Guidance so that CBs must demonstrate that they have processes in place to inform complainants of the potential for alternative complaint handling options in the event that a credential holder is also a registrant/licensee with a regulatory body or holds an approved credential with another approved CB.
• FSRA’s approach to facilitating information sharing and complaint handling will provide additional transparency and help empower consumers to choose a complaint handling process/route that best suits their needs. It will also provide CBs with discretion to share information in alignment with existing privacy legislation.
• FSRA will review an applicant’s processes and procedures to help ensure that they address the need to provide sufficient information to consumers about pursuing a complaint.

Several stakeholders made comments in support of FSRA’s risk-based approach to CB examinations.

A number of stakeholders suggested that FSRA should engage in a higher level of proactive monitoring of CBs, as an over-reliance on complaints-based monitoring could leave a gap in investor protection.

Several stakeholders also commented that FSRA should provide additional details on its approach to supervising the sector, such as FSRA’s:

• planned supervision activities of approved CBs and individuals who use the FP/FA title without an approved credential;
• complaints process; and
• expectations for a CB’s complaint handling and disciplinary processes

One commenter stated that FSRA should clarify how non-compliance or findings of misconduct against a credential holder by an approved CB would impact the respective individual’s ability to sell products under an existing regulatory framework.

• The proposed Supervision Guidance outlines how FSRA intends to approach supervision under the FPTPA.  
• FSRA has made several amendments to the proposed Supervision Guidance to clarify and enhance its approach, including additional detail on FSRA’s:
  • supervisory plan for approved CBs (Annual Information Returns, Examinations, Thematic Reviews);
  • proposed supervisory approach for individuals using the FP/FA titles without an approved credential; and
  • proposed process for handling complaints, and the scope of FP/FA complaints.
• FSRA is considering additional measures with respect to monitoring individuals who use the FP/FA titles without an approved credential to complement its proposed complaints-based approach to supervision.
• The FPTP Rule and proposed Application Guidance set out and describe the criteria for obtaining approval under the FPTPA as a CB. FSRA expects approved CBs to have appropriate disciplinary and enforcement processes in place to ensure that only qualified and suitable individuals are permitted to use the FP/FA titles. FSRA also expects that approved CBs will share information with other approved CBs and regulatory bodies in the event that disciplinary action has been taken. Whether a finding of misconduct by an approved CB would affect an individual’s ability to sell a regulated product would be dependent on the steps taken by the regulatory body.

One stakeholder commented that to ensure the public interest is protected, any credentialing body seeking approval from FSRA must have sufficient expertise, human and financial resources, and infrastructure to fulfill its mandate.

• FSRA has amended the Application Guidance to support its mandate to administer and enforce the FPTPA. In particular, in order to satisfy the criteria in the Rule, CBs should:
  • demonstrate a sound financial position by including a copy of the most recent audited financial statement for review;
  • have a process in place to assess a credential holder’s suitability / good standing upon recertification / renewal of a credential; and
  • ensure public disclosures on disciplinary actions include a sufficient level of information on the key facts and outcomes relating to cases.

Overall, stakeholders supported the proposed minimum curriculum standards for FP and FA title use.

The following suggestions were provided:

• Enhance the FP minimum standard to include content relating to the value and benefits of financial planning, understanding the role of the financial planner and defining the terms of engagement for clients to outline the scope of financial planning activities.
• Enhance the minimum standard to include knowledge on public and private pension plans.
• Include a minimum education requirement, in addition to the minimum standard for the credential curriculum, such as a university degree in a related discipline.
• Expand the curriculum content with respect to client outcomes to include the ability to analyze and determine appropriate asset allocation for clients.

Some stakeholders expressed support for a potential “top-up” course or credential that would leverage the existing Life Licence Qualification Program (LLQP) and bring the curriculum into alignment with the minimum standard for FA title use. Inquiries were also raised about how FSRA could facilitate this process.

There were also differing opinions about FSRA’s proposed amendments to the technical knowledge section of the FA curriculum standard, which now reflects a focus on standard retail investment products, and how those products should be considered with respect to other areas of financial planning/advice. Some stakeholders suggested that FSRA should adopt a product agnostic approach to the technical knowledge standard for FA title use.  

• The proposed Application Guidance sets out FSRA’s views with respect to minimum curriculum standard for FP and FA credentials. This includes foundational knowledge on the financial services marketplace, ethical practices and how to deal with clients.
• FSRA has amended the proposed Application Guidance to include the identification of appropriate asset allocation as a fundamental concept for both FP and FA credentials.
• FSRA will continue to work with the insurance industry to consider options that would permit individuals who only hold a life insurance agent licence to use the FA title.
• If proposed by a CB applicant, FSRA will consider credential approval submissions that would leverage the existing Life Licence Qualification LLQP curriculum.
• FSRA’s amendments to the technical knowledge section of the curriculum standard support feedback received from the first consultation, as well as findings from FSRA’s 2020 consumer research survey, which suggest that consumers expect an individual who uses the FA title to be well placed to provide investment advice.

Most stakeholders are supportive of FSRA’s consideration of requiring credential holders to disclose to consumers the approved credential(s) they hold, which permits FP/FA title use.

One stakeholder also suggested that FSRA introduce supplementary titles, which would more closely resemble the services and activities that the individual would undertake. For example, “FA, Insurance Advisor”.

• Disclosure of credentials is a key element to providing consumers with greater confidence that the individual providing financial planning and advisory services is adequately qualified.
• FSRA has amended the proposed Application Guidance to clarify that in order to satisfy the requirements of the Rule, CBs must demonstrate that they have a process in place to require credential holders to disclose their approved credential(s) to consumers in a clear and timely manner.
• FSRA will review, through the application process, that CBs have an effective and transparent process for credential holders to provide consumers with appropriate disclosure.

In response to feedback received during the first consultation, FSRA provided further detail on its approach to regulating titles that could reasonably be confused with FP/FA in the proposed Supervision Guidance. FSRA also included a table of titles that could be considered in and out of scope of the framework.

A number of stakeholders suggested that FSRA remove the list of titles considered out of scope, as it could provide an unnecessary safe harbour for individuals who wish to circumvent the framework.

There were varying comments about the scope of titles that should be considered in and out of scope. Some stakeholders suggested that FSRA take a broader approach and include additional titles on both sides of the table. However, there was little consistency in the proposed additional titles, and no single title received widespread support for inclusion.

One stakeholder supported a principles-based approach to determining titles that could reasonably be confused with FP/FA and that rather than a list of titles, FSRA should adopt principles which align with its consumer protection mandate and titles commonly used in the marketplace.

• The FPTPA introduces title protection in Ontario relating to the use of the FP and FA titles. This includes abbreviations, equivalents in another language, and titles that could reasonably be confused with the FP and FA titles.
• Based on feedback received, FSRA has removed the list of titles that could be considered out of scope of the framework.
• FSRA has not amended the list of titles it views as in scope, and will focus on use of the FP/FA titles and titles that are very similar.
• Post-implementation, FSRA will monitor the market response to the new requirements and any changes to title use that occur, and as necessary, consider providing additional interpretation of the FPTPA to protect consumers and support the intent of the framework.
• FSRA will also leverage consumer education campaigns to provide the public and industry with relevant information on the framework.

Some stakeholders suggested that FSRA should adopt a more proactive approach to monitoring uncredentialed individuals and that its supervision of individuals misusing titles should be strengthened.

• The FPTPA grants FSRA authority to take enforcement action against:
  • approved CBs;
  • individuals who use the FP/FA title without an approved credential; or
  • persons or entities who misrepresent as an approved CB or offer an approved credential without approval to issue one.
• In the case of individuals using the FP/FA title without an approved credential, FSRA has the authority to issue a compliance order.
• FSRA is implementing the framework as laid out under the FPTPA, and will continue to monitor compliance with the framework on an ongoing basis.
• FSRA has amended the proposed Supervision Guidance to provide additional detail on its approach to monitoring and enforcement under the FPTPA.

Some stakeholders continue to support exemptions for individuals that are subject to IIROC and MFDA oversight or regulatory bodies who derive their regulatory authority from statute.

• As noted in the first consultation summary report, a majority of stakeholders did not support exemptions for individuals who currently use the FP or FA titles.
• FSRA’s objective is to establish a common minimum standard for all FP and FA title users and ensure that those individuals continue to meet minimum standards, both now and in the future, to provide ongoing protection that will serve the public interest.
• FSRA is not contemplating exemptions for any class of individual or entity.

To implement the FP/FA title protection framework, FSRA must establish a fee structure that supports its mandate to operate as an independent, self-funded regulator.

As part of the second consultation, FSRA included a high-level overview of its proposed fee structure in the Notice of Changes and Request for Further Comment.

Several key themes were raised by stakeholders about the proposed approach, such as:

• Concerns that individuals holding multiple approved credentials could potentially pay more than one fee under the framework.
• FSRA should clarify the criteria used to define “credential holder” with respect to calculating fees (e.g., residency in the province, where the individual conducts business, use of title).
• FSRA should not define “credential holder” and should allow approved CBs the flexibility to determine who is considered a credential holder/fee-paying individual.
• Scope for proposed fee structure to disadvantage smaller organizations that may seek approval as CBs.

• In July 2021, FSRA posted proposed amendments to Rule 2019-001 – Assessments and Fees (FSRA Fee Rule) for a 90-day public consultation.
• The proposed amendments, if approved, will establish the fee structure under the FPTPA.
• FSRA provided additional detail and policy rationale, and addressed the key themes raised, in the accompanying Notice of Rule and Request for Comment.

The majority of stakeholders continue to support the need for a consumer education campaign as part of implementing the FP/FA title protection framework. Some also stated that FSRA should spearhead the campaign.

Several stakeholders sought additional detail on FSRA’s strategy for educating consumers.

• FSRA is in the process of developing an industry and consumer education campaign to support the implementation of the financial professionals title protection framework. FSRA intends to provide clear and easily accessible information through various communication channels.  
• FSRA believes that an effective consumer education campaign will require stakeholders, including but not limited to approved CBs, credential holders, and regulatory bodies, to collaborate and coordinate efforts.
• Working collaboratively with approved CBs, FSRA will create educational materials to enhance the public’s and industry’s knowledge of elements of the proposed title protection framework, as well as to ensure that all relevant stakeholders have the appropriate information to support this process.

Following feedback received during the first public consultation, FSRA amended the FPTP Rule to require approved credentialing bodies to provide FSRA with information about credential holders posted on their websites (e.g., name, credential and any discipline/enforcement actions). This new provision would provide FSRA with the data required to develop a public registry of credential holders.

Stakeholders overwhelmingly supported the development of a public registry. The majority of stakeholders also expressed support for the following:

• The registry should include the disciplinary history of an individual so that consumers are provided with the full regulatory picture and historical record of an individual
• The registry should be national in scope and harmonized with other FP/FA frameworks and/or financial services sectors.

• FSRA supports the development of a public registry of individuals who hold an approved credential in Ontario.
• FSRA is exploring options with respect to the scope of such a public registry and the type of information that would be made available. At a minimum, FSRA is considering including the following data as part of the FP/FA public registry:
  • the name of the individual;
  • the approved credential held by the individual; and
  • the CB that issued the credential, along with a link to the CB’s website
• FSRA will engage with prospective CBs and other stakeholders to discuss these proposals further.
• FSRA will also engage with other jurisdictions to discuss opportunities for harmonization.