CFR is the fundamental concept that customer interest comes first. As interpretations of CSA requirements evolve, Mehrad says attorneys should continue to adhere to regulatory decisions to assist registrants. “Securities registrants must resolve any material conflict of interest in the best interest of their client and ensure that the action taken is appropriate for the client.”
The change in the rules is an enhancement to the existing provisions. For example, says Mehrad, suitability has always been an obligation, but has now been extended to ensure that the action puts the interests of the customer first. “When you create a suitability obligation, you must also compare your action against comparable products.”
The CFR also requires changes to the Registrar of Securities Compliance Manual, Customer Disclosure and Account Opening Documentation. Mehrd says lawyers should ensure these documents are current and comply with regulations and any future regulatory guidance.
“The plus side is that a lot of these disclosures will soon be available on the Internet, and firms will have a better appreciation of what other companies are disclosing in order to have a better barometer of their disclosures than their peers.”
While there has been negative publicity about some aspects of the CFR, Mehrd says that the proliferation of technology tools in the wake of the CFR gives consultants a more scientific and comprehensive comparison than before.