Standards already exist in Canada regarding financial advisers' fiduciary duties, says Laura Paglia in Law Times

Lawyers Clash Over Imposing Statutory Fiduciary Duties for Financial Advisers

April 05, 2010

Canada has been "tinkering around the edges" of fiduciary standards for financial advisers while the rest of the English-speaking world has leapt headlong into the debate in the wake of the worldwide financial crisis, says Ed Waitzer.

Mr. Waitzer, chair in corporate governance at the Schulich School of Business and Osgoode Hall Law School, made the comments at a conference co-hosted by the Hennick Centre for Business and Law, which he directs, and the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada). He said he hoped the conference would help fill the silence on the regulatory front in Canada.

American lawmakers are attempting to set a uniform fiduciary duty across all financial advisers. Regulators in the United Kingdom have attempted to tackle the conflict of interest that arises when brokers are incentivized to sell certain financial products, by eliminating commissions.

Lawyers at the event clashed over whether Canada needs to impose a statutory fiduciary standard for financial advisers.

Laura Paglia says the core principles being debated in the United States, which revolve around disclosure of conflicts of interest and putting clients' interest first, were already generally accepted in Canada under the duty of care owed to clients by all financial advisers: "We have extensive case law enforcing that duty of care and if you breach that standard of care, an investor goes to court and can win in simple negligence. And they get restituted without ever making out a breach of fiduciary duty. We don't need [the fiduciary standard] in Canadian law, because we never had the debate. It’s always been there through the case law, through regulation and through industry standards."

While investors do sue for breach of fiduciary duty, Laura says a very small proportion of cases go to trial and even fewer make the claim stick, because the term implies a much higher standard of care than in other jurisdictions.

"It's not bad, because it doesn't mean they weren’t restituted. It means they were otherwise restituted without needing to go to the fiduciary standard," she notes.

Read the full article here.

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