On October 25, 2012 the Canadian Securities Administrators (“CSA”) published for comment Consultation Paper 33-403 which discusses the potential benefits and feasibility of imposing a statutory fiduciary duty on advisers and dealers to act in the best interests of clients.

The Consultation Paper describes a possible statutory best interest standard and discusses whether this standard should be adopted. It also looks into whether another policy solution would be more effective or whether the current Canadian standard of conduct is sufficient.

The Consultation Paper is broken down into nine parts. Part 1 is an introduction. Part 2 summarizes the background of the fiduciary duty debate. Part 3 describes what a fiduciary duty is and when it arises at common law. Part 4 discusses the current standard of conduct for dealers and advisers in Canada. Part 5 reviews what other countries (U.S., U.K., Australia and the European Union) are doing in this area. Part 6 identifies the five investor protection concerns with the current standard of conduct applicable to registrants in Canada. Part 7 seeks input on one possible description of a statutory best interest standard for advisers and dealers. Part 8 reviews the potential benefits and feasibility of imposing the best interest standard described in Part 7. Part 9 describes the process for making submissions as part of the consultation.

The CSA makes it clear in the Consultation Paper that no decisions on this matter will be made without broad public consultation and discussion. The CSA is requesting feedback from investors and market participants on the Consultation Paper and has included 52 consultation questions for consideration. The comment period is open until February 22, 2013.

For more information see CSA Consultation Paper 33-403 The Standard of Conduct for Advisers and Dealers: Exploring the Appropriateness of Introducing a Statutory Best Interest Duty When Advice is Provided to Retail Clients (PDF).