A staff notice published by the Canadian Securities Administrators (CSA) on Sept. 24 reminds portfolio managers (PM) who are operating as robo-advisors that they are subject to the same obligations as their flesh and blood counterparts.
In Staff Notice 31-342, Guidance for Portfolio Managers Regarding Online Advice, the CSA notes that several Canadian portfolio managers have recently begun operating as online "robo-advisers", offering low-cost, discretionary investment management services to investors through their web sites.
The regulators note that, robot or not, registered advising representatives (AR) remain actively involved in decision-making process and must therefore conduct and document thorough know-your-client (KYC) fact finds to justify their investment recommendations.
"The rules are the same if a PM operates under the traditional model of interacting with clients face-to-face and if a PM uses an online platform," reads the notice, which outlines the steps robo advisors should go through with clients.
"An online adviser's KYC process must amount to a meaningful discussion with the client or prospective client, even if that discussion is not in the form of a face-to-face conversation," warn the regulators.