Implemented by the Joint Forum of Financial Market Regulators on Dec. 31, 2005, the capital accumulation plan guidelines aim to clarify the expectations of regulatory bodies. And while these guidelines are not compulsory, the industry has nonetheless adopted them in order to preserve its credibility in the aftermath of the recent financial scandals…and to stave off intervention by legislators.
Created in 1999 by the Canadian Securities Administrators, the Joint Forum brings together, among others, the Canadian Council of Insurance Regulators, Canadian Association of Pension Supervisory Authorities, and the members of the Canadian Insurance Services Regulatory Organizations . Participants of these include Office of the Superintendent of Financial Institutions and the Autorité des marchés financiers .
In general, the guidelines define the responsibilities of each party in a capital accumulation plan (including registered defined contribution retirement plans). These responsibilities include: those of the sponsor with respect to choosing a plan and a service provider and delegating tasks to the provider; those of the service provider with respect to the tasks it has been delegated; and those of members with respect to their use of the services offered to them by their plan.
The guidelines also stipulate that the sponsor or service provider, as applicable, must provide the following to members:
- Decision-making tools to help members with their investment decisions (e.g. investor profile questionnaires, retirement calculators, asset allocation models)
- Ongoing communication
- Sufficiently diversified investment options
- Investment options that reflect the investor’s risk profile
- Reasonable transfer options
- Regular evaluation of the service provider
- Day-to-day administration of the plan
- Access to an investment consultant if the sponsor requests this of the service provider
The guidelines state it is the responsibility of members to:
- Use the information and decision-making tools made available to them
- Consider using the services of a competent investment consultant.
The guidelines also cover group RRSPs and deferred profit-sharing plans.
Sources: www.jointforum.ca; Desjardins Financial Security reference booklet