A new report of the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) reflects the survey responses of almost 3,000 mutual fund dealing representatives from five of Canada’s largest bank-affiliated dealers.
The survey ran from Nov. 26, 2024 to Dec. 13, 2024, according to the OSC’s news release announcing the release of the report titled “Sales Culture Concerns at Five of Canada’s Bank-Affiliated Dealers.”
The survey covered the sales environment and pressures, product range, and knowledge of mutual fund dealing representatives. Among positive responses received, the representatives considered the product range satisfactory for their clients.
However, the report also revealed possible areas for improvement. Many survey respondents believed a broader product range would be beneficial. According to the OSC’s news release, among the survey respondents:
- one in four reported that clients received recommendations for products or services outside of their interests at least “sometimes”
- one in three claimed that clients received false information about products and services recommended to them
- 40 percent said scorecards – a way to assess performance against target measures like sales and/or activity-based targets – influence product and service recommendations to clients
In the news release, the OSC and CIRO identified the sales environment, compensation, incentivization, and performance tracking as factors potentially contributing to these results.
“While it’s clear many bank representatives are prioritizing quality advice, it is also clear that sales pressures and incentivization may be driving concerning behaviours,” said Grant Vingoe, OSC CEO, in the news release. “The focus of the bank representatives should be the best interests of their customers and clients – not feeling heightened pressures to meet sales targets.”
“The results from the survey identified areas where more work is needed and we appreciate the cooperation and willingness of the banks to participate and share our ambition to do what’s right for investors,” said Andrew J. Kriegler, CIRO president and CEO, in the news release.
“We look forward to continuing our work to address these concerns,” Vingoe added.
According to the OSC’s news release, this work’s next phase entails efforts to improve understanding of the current sales practices and dealers’ controls to tackle material conflicts of interest due to these sales practices.
Survey background
The OSC’s news release provided more information about the circumstances leading to the survey and report. Public reports claimed that high-pressure sales environments at Canada’s five biggest bank-affiliated dealers may harm investors.
In November 2024, the OSC and CIRO announced they would work together to review bank branch sales practices. In the coordinated review’s initial phase, they sent a voluntary survey to mutual fund dealing representatives working in a bank branch for a mutual fund dealer affiliated with five Canadian banks.
“Our mission is to promote healthy capital markets by regulating fairly and effectively so that investors are protected and confident investing in their futures,” Kriegler said in the news release. “Through continued transparency and cooperation, we can achieve this and ensure that Canadians feel at ease when they are planning for their financial futures.”
According to the news release, the CIRO is the national self-regulatory organization that oversees investment dealers, mutual fund dealers, and trading activity in the country’s debt and equity marketplaces.
On the other hand, the OSC aims to safeguard investors from unfair or fraudulent practices, drive efficiency and competition among capital markets, encourage capital formation, improve financial system stability, and reduce systemic risk.