Navigating the ever-evolving regulatory landscape

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Since 2008, the financial services regulatory landscape in Canada and around the globe has been in a constant state of flux. Regulators are leaving less to interpretation and moving away from principles-based regulation to ever more prescriptive rule making. In order to keep up with new requirements, firms are increasingly forced to direct resources from strategic initiatives towards non-discretionary spending on compliance and supporting technology.

From an initial post-crisis focus on risk management, global regulators have turned their attention to investor protection, with an emphasis on disclosure, transparency and advisor behaviour. While Canadian institutions did not experience the full depths of the global financial crisis, or succumb to the scandals that have plagued the UK and Australian markets, Canada’s securities regulators have seen sufficient potential for wrongdoing in the local market and financial institutions have experienced a steady stream of increasingly prescriptive regulation (see Exhibit 1).

EY - Best Interest Standard - Exhibit 1: An ongoing progression of regulatory reforms

In the context of global regulatory trends, none of this should come as a surprise. As seen in Exhibit 2, Canadian regulators are following in the footsteps of their counterparts in the UK, Australia and the United States. However, with Canada’s uncommonly fractured regulatory landscape, the debate and opposition to new regulations, coupled with the need for several regulators to craft their own versions of the rules often leaves institutions with very little time for process or system changes or the training necessary for implementation. These short timelines also often result in a more tactical “letter of the law” response, rather than a well-thought-out strategic implementation that involves more than just system and process changes.

EY - Best Interest Standard - Exhibit 2: Global regulatory landscape

With this in mind, EY presents this site as both an educational resource, with plain-language explanations of the latest regulatory proposals as they evolve, and a call to action. Financial institutions should begin to prepare now for the changes to come. While the specifics of the individual amendments may be in flux, the broader objectives will remain and there is plenty that can be done in the near term to assess areas of risk and prepare well-thought-out strategies before the important becomes the urgent.