Ontario’s securities regulator and Canada’s investment industry watchdog have launched an investigation of sales practices in Canadian bank branches.
The Ontario Securities Commission and the Canadian Investment Regulatory Organization said Tuesday that the initial phase of the review will develop an understanding of the sales culture in banks to identify and assess the scale of the potential issues.
The OSC and CIRO’s announcement follows a media report from CBC in March that probed alleged high-pressure sales practices for banking products and mutual funds at some Canadian banks.
The industry’s lobby group said maintaining strong customer relationships is fundamentally important for banks.
“Canada’s banks are steadfast in their commitment to providing advice that is clear, transparent and aligns with helping customers reach their financial goals,” Canadian Bankers Association spokesperson Maggie Cheung said in an e-mail statement.
“Banks and their employees take comprehensive steps to comply with consumer protection measures and embrace the responsibility of putting customer needs at the center of all product and service recommendations.”
In June, 2023, The Globe and Mail explored how the sales culture at Canadian banks is designed to nudge customers into high-fee products. Branch advisers are expected to meet sales targets, which can pit their own interests against those of the customer.
Canadian banks have faced scrutiny for aggressive sales practices before. In 2018, a Financial Consumer Agency of Canada review of the sector found that branches have become more like stores that sell advice and investments.
As a result, Canadians could be sold unsuitable products, and the banks’ efforts to prevent that are insufficient, the FCAC said in its report. That probe was initially prompted by a CBC investigation in 2017 into bank sales practices.
In recent years, regulators have largely focused on making sales information clearer for customers. There are improved disclosures of fees and conflicts of interest, and attempts to clarify the use of professional titles. But sales practices have largely been neglected by regulators.
The OSC and CIRO said they will conduct the probe over the next few months.
With reports from Clare O’Hara.