Sprung Investment Management Responds to OSC Plan to Impose a Fiduciary Standard on Investment Advisors

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The OSC is reviewing the potential benefits of introducing a statutory fiduciary, or ‘best interest’ standard for securities advisors when they provide advice to retail clients.

In response to this proposal Michael Sprung, president of Sprung Investment Management Inc., has made a submission to the OSC. Mr. Sprung contends that the discussion surrounding investment advisors and their clients has largely ignored the role that capital markets play in enhancing the well-being of the economy. This role has several objectives, some of which may be in conflict with the objectives of many investors but are nonetheless necessary to allow capital formation and capital allocation to be directed in an efficient manner.

Much of the confusion to the investing public revolves around the fact that many investment industry professionals call themselves advisors or portfolio managers. The distinction between an advisor/portfolio manager who must sell “suitable” investments and advisor/portfolio managers who meet a fiduciary standard is at best, murky.

Mr. Sprung proposes that a revised regulatory framework should:

·         Make a clear distinction between individuals who meet a fiduciary or best interest standard and those that sell “suitable” investment product;

·         Restrict terms such as ‘advisor’ and ‘portfolio manager’ to individuals with the training and experience to act in the best interest of clients;

·         Prohibit those individual from selling products that present real or potential conflicts of interest, unless very extensive disclosure is present;

·         Indicate that other industry players, including financial planners selling mutual fund products, are selling “suitable” products and are in fact salespersons;

·         Disclose to clients detailed information regarding the remuneration all financial intermediaries.

Financial markets are vital to capital formation and the continued growth of the Canadian economy. The regulatory framework governing financial intermediaries must balance that positive role with the need to protect Canadian investors.

Sprung Investment Management Inc. is an independent, privately-owned investment counselling firm located in Toronto, providing discretionary investment management for Canadian private clients, not-for-profit organizations, endowments, foundations and small institutions.

Michael Sprung CFA, President - Michael brings more than 30 years experience in the Canadian investment industry and has managed equity and balanced portfolios as large as several billion dollars. Michael can be seen as a commentator on BNN-TV and is a frequent contributor to the Canadian Financial Press.

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Robert Champion

Lois O'Sullivan
Sprung Investment Management
since: 07/2012
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