March 9, 2012 - Conference Call With Individuals From Foreign Jurisdictions

March 9, 2012 9:30 – 11:30 a.m.

MEMBERS: Anita Anand, Chair
Nancy Averill
Stan Buell
Steve Garmaise
INVITEES: Lori Schock, Director of the Office of Investor Education and Advocacy for the US Securities and Exchange Commission (SEC)
Adam Phillips, Chairman, U.K. Financial Services Consumer Panel
Allan Krystie, Senior Administrator (secretary to the meeting)
Chava Schwebel, IAP Research Assistant

Introduction (Steve Garmaise)

  • OSC’s Strategic Plan (SP) initiative was discussed, in particular, the emphasis on investor protection and research.
  • Recent events and issues were also discussed, e.g., the federal government’s reference to the Supreme Court regarding the creation of a national securities regulator
  • A discussion followed.


  • Regulatory changes in UK as it moves towards twin peaks model were discussed as well as the aim to establish statutory fiduciary duty similar to that introduced by the Dodd-Frank Act (DF).
  • EU Markets in Financial Instruments Directive currently may incorporate elements of this principle; European Parliament sympathetic to adoption of fiduciary duty.
  • In US, Jan. 2011 study of broker-dealer and adviser registration information and study of investment fund industry issues discussed.
  • Challenges of investor testing discussed.
  • Rule-making process relating to fiduciary duty standard introduced by DF was discussed.

Investment Industry

  1. Fiduciary Duty
    • “Fairness” the historical standard, but difficult to enforce.
    • Lack of political support in UK for adoption of fiduciary duty standard, but inclusion of key elements of the principle going forward is a possibility.
    • Research about investors’ understanding of fiduciary duty and suitability requirements were discussed.
    • Criticism of SEC fiduciary duty was discussed, in particular that the study did not adequately address costs and benefits or practicality of such a standard.
    • Further research necessary.
  2. Commissions and Fees
    • Discussed average fund management fees in the UK.
    • Participant observed that consumers do not appreciate the true cost of investment advice, and that the business model needs to change.
    • Need for middle market solution to provide low-cost, good quality advice to consumers was discussed.
    • With decline of defined benefit schemes, consumers should be encouraged to save more and industry should provide safe vehicles for this.
  3. Consumer Financial Literacy and Disclosure
    • Consumer research about their advisor is important.
    • Discussed UK debate about introducing models to deliver “simplified advice”.
    • Limits of disclosure were discussed as well as the idea that consumers should become more self-reliant regarding investment choices.


  • Investor redress available through SEC action or mediation/arbitration, which may be a shorter, easier process than courts.
  • Advantages and disadvantages of Commission actions were discussed including costs of arbitration and class actions.
  • Alternative routes were discussed, i.e.: financial ombudsman service; statutory redress under Financial Services and Markets Act; compensation mechanism if firm has failed.

Investor Representation: Advisory Panels

  • Office of the Investor Advocate to be established in the US. Challenges of filling Investor Advocate position were discussed.
  • SEC funding for Office of Investor Education and Advocacy was discussed.
  • Investor outreach methods were discussed.
  • Benefits of engagement with practitioner panels were discussed.

Concluding remarks (Chair)

  • IAP activities and planned initiatives were discussed.
  • Benefits of present consultation to IAP’s work were discussed.
  • Chair remarked that although institutional structures different, missions similar.