Who is primarily responsible for investor protection?
In Canada, the various provincial governments have the last word on investor protection. Each province has a securities commission or administrator that oversees a provincial securities act. This act is a set of laws and regulations that outline what players in the market can and cannot do.
All the securities acts are based on the principle of full and plain disclosure. Any information that will affect investors must be available to all investors in a timely fashion. Usually, the onus is on the issuer to disperse information. However, just because a company meets a regulator’s requirements for disclosure does not mean its securities have investment merit. Potential investors should keep this in mind.
Securities commissions also require registration of all organizations and sales staff involved in the investment business. There are different categories of registration – investment dealer, registered investment advisor, mutual fund salesperson and so on. Before registration is allowed, basic standards must be met. These include minimum capital requirements for a firm and minimum educational qualifications for personnel.
The Acts also specify broader responsibilities for investment advisors and their relationships with clients. They are obliged to deal fairly, honestly and in good faith with clients.