It’s a world of hurt out there for small investment dealers as difficult markets and rising regulatory costs continue to drive consolidation in the financial services industry, said Susan Copland, a director with the Investment Industry Association of Canada (IIAC), at the association’s small and independent dealer symposium in Toronto on Tuesday.

“It has not been in your imagination that there has been a real increase of regulation over the past couple of years compared with what it was previous to 2008,” Copland added. “Now, you have to be able to deal with these issues a lot more and at a quicker pace, which is taking a significant amount of resources from the dealers to do so.”

Although resignations from Investment Industry Regulatory Organization Committee (IIROC) members have been fairly consistent over the past years, there have already been eight firms that handed in their resignations in the first quarter of 2013, she said.

“There is more consolidation to come, so 2013 might be a record year for resignations which, could be a reflection of the consolidation that needed to happen for the past while,” Copland noted. “Hopefully, that will make the remaining firms stronger and more equipped to deal with the recovery.”

An increasing regulatory burden continues to be a major concern for small dealers with new and expected rules being released for comment becoming cumbersome. In addition to the further regulatory requirements from the U.S. Foreign Account Tax Compliance Act, European transaction taxes, new reporting requirements from the Canada Revenue Agency and the Financial Transactions and Report Analysis Centre of Canada, firms are also seeing an increase in new and expected rules from the Canadian Securities Administrators, IIROC and the provincial securities regulators, Copland said.

The number of total rules out for comment by regulators has increased significantly to 74 thus far in 2013 compared with only 28 in all of 2007. In March 2013, the IIAC wrote a letter to the regulators recommending a slowdown or temporary halt in the rule-making process and the prioritizing of the accumulated backlog of proposed rules.

In the letter, the IIAC suggested that more time is needed for: the rigorous cost-benefit analysis of proposed rules to determine the precise need for the rule and its impact on registrants and the markets at large; assessing unintended consequences of proposed rules; and implementing compliance procedures and technology at smaller firms.

“We want them to realize that single rules may not look like such a big deal, but when they pile them on top of the number of other things that are going on, one additional rule just means more system changes,” Copland said.