March 23, 2014
A recent Financial Post article discusses new classifications that are being proposed by provincial securities regulators, which would cause formerly conservative mutual funds to be classified as high risk investments. The purpose for these new classifications is to help make funds more comparable and ultimately to protect investors. John Fabello, a securities lawyer with Torys, weighs in.
Below is an excerpt of the article.
“There is a risk that regulators are taking a cookie cutter approach to suitability,” says John Fabello, a veteran securities lawyer at Toronto law firm Torys LLP.
One example, he says, is that seniors may be restricted from investing in equities, which are perceived as growth vehicles for those who can afford sustained downturns. But that assumes seniors are no longer working, which some may be, and could lead them to invest solely in fixed income products which come with their own risks.
“Rising interest rates sink values of existing bonds and low rates of return generally mean that seniors who want [or] need high income may have to eat into capital,” says Mr. Fabello. “The net result can be worse than [for] an investor in high dividend equities that take a hit due to short term volatility.”
To read the full article, click here.