UPFRONT
NEWS ANALYSIS
An evolution in self-regulation The CSA’s ambitious new plan to create a single Canadian self-regulatory organization has brought cause for cautious optimism across the wealth management industry
IN AUGUST, following a nearly 10-monthlong consultation period, the Canadian Securities Administrators announced that it is pushing through with a plan to create a new single self-regulatory organization (SRO) for Canada’s investment industry. This represents a significant step forward, promising to address the confusion and unevenness that many registrants have long had to contend with in the current two-SRO system, which consists of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).
Kivenko, president of Ontario-based Kenmar Associates, says having a single SRO could potentially address retail investors’ frustrations with firms’ rules for handling client complaints, professional standards for salespeople and know-your-client processes, among others. “If implemented correctly, it could mean a reversion to co-regulation from outdated self-regulation,” Kivenko says. “Rules, policies, enforcement and priorities would be less industry-centric.” In its plan for the new SRO – which would be a new entity, not just the fruit of an IIROC-
“It could mean a reversion to co-regulation from outdated self-regulation. Rules, policies, enforcement and priorities would be less industry-centric” Ken Kivenko, Kenmar Associates “Canada needs a national regulatory body,” says David Little, senior financial advisor and director of Blue Oceans Private Wealth. “I think we’re the only G7 country that doesn’t have a national regulator. It would definitely be something very positive for the industry.” Investors also stand to benefit. Ken
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MFDA merger – the CSA described numerous measures and solutions to ensure the public interest isn’t neglected. Those include requiring a majority of the new organization’s board members, including the chair, to be independent; having a certain proportion of directors who have relevant investor protec-
tion experience; requiring CSA involvement in determining the new SRO’s governance; and establishing an investor advisory panel. Kivenko is cautiously optimistic. “They must ensure meaningful investor input at the outset of designing the new SRO and during implementation,” he says. “They must not allow the worst rules in either existing SRO to be the accepted rule in the new one.” Laura Paglia, who recently succeeded Ian Russell as president and CEO of the Investment Industry Association of Canada (IIAC), believes having one SRO will lead to a unified, consistent and simplified regulatory approach that will allow investors to receive seamless access to investment solutions. “A single Canadian SRO should help meet investor expectations for a flexible one-stop shop for a variety of products and services,” she says. Paglia believes the process of creating a single new SRO should be expedited so its benefits can be made available quickly. A direct relationship with the industry, she adds,
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