Your proposition may be good
But let’s have one thing understood
Whatever it is, I’m against it!
And even when you’ve changed it or condensed it
I’m against it!

In addressing the reform of Canada’s securities laws, we all need to be careful lest these words from Groucho Marx become too true. Much of what’s on the regulatory policy agenda these days is fundamental in nature and warrants careful, non-partisan consideration. This is long-view stuff. It challenges each side to be wise instead of clever and to give ground if necessary so that progress can be made.

Yet, look at the past 10 years. That’s how long initiatives for plain disclosure of fees and investment performance have been under debate. Now, a decade later, the investment industry says it’s still not ready for implementation. It’s hard not to see this as simple foot dragging especially as, over the same decade, the industry’s quibbled and quarrelled about a commonsense requirement that mutual fund investors be given a concise, plain language summary of key information at or before the point of sale.

Likewise, despite almost 20 years of criticism over conflicts of interest rife in mutual fund sales and compensation practices, the industry continues to fight tooth and nail against reform of this shabby aspect of its business model. Whole generations of regulators have come and gone while fund companies, dealers and their lobbyists filibustered on this issue.

And then there’s the battle over whether advisors and dealers should be required to act in their clients’ best interests. Industry pushback against this initiative has been extensive, making it clear they’re prepared to dig in for a very long siege.

What’s revealed here is an industry seemingly unwilling to embrace any meaningful investor protection measure, no matter how basic or vital it may be. Instead, a culture of resistance has taken root. Every initiative gets treated as a mortal threat and every fight becomes one of unlimited duration.

The result, not surprising, has been a pile-up of unfinished regulatory business, all still very active on policy-makers’ plates; and this has the industry feeling, and complaining about, a sense of regulatory burden.

But let’s remember how much of this burden arises from obstinacy itself. A monkey on your back is the inevitable consequence of letting nothing come to fruition, of insisting that everything be adjourned for further study or for observable results to arise from reforms in other countries. It’s the dead weight of stifling all forward progress on the pretext that any change might bring “unintended consequences.”

Let’s also remember that undue delay imposes significant costs on others. Within securities commissions and self-regulatory organizations (SROs), the resources consumed as a result of initiatives dragging on are enormous.

Moreover, if cries of “burden” prompt regulators to adopt an air of apology — which seems to be happening in some quarters — there’s tremendous risk that public confidence in our regulatory system will be eroded, as an apologetic stance might be seen as being far too close to contrition.

Those same cries also give oxygen to the dubious notion that regulation is justified only where its benefit can be shown to outweigh its cost. This commoditizes the public interest and, in the process, it also suggests that value can somehow be assigned to the public interest in the same way that computers are priced and compliance officers’ salaries are negotiated.

It’s also a mug’s game since it places an unattainable onus on those who advocate for regulatory protections. Costs are easily quantified and tallied up. Benefits can’t be so readily calculated, particularly where the benefit consists of preventing some kind of harm.

This is not to say there are never times when regulation runs amok. Canadian policy-makers didn’t exactly cover themselves in glory when they implemented the SROs’ set of client relationship model requirements, only to have the CSA then issue new and significantly different ones. An inefficient approach to getting the right rules in place wastes time and resources for all involved.

However, the fact is regulators have a duty to regulate in order to fulfil their statutory mandates, even if that imposes costs, and it’s wrong to suggest otherwise.

It’s also wrong to drag out every policy skirmish to the end of time — not merely because that visits undue cost on everyone, but also because it thwarts the achievement of fair and efficient markets and adequate investor protection. That’s the real regulatory burden, and we all have a role to play in easing it.


Read the response from the Investment Industry Association of Canada to this column: Taking issue with FAIR Canada’s criticism of the investing industry