Stacked white books on rules and regulations

Re: Batten down the hatches, editorial, Investment Executive, May 2019

The editorial in the May 2019 edition of Investment Executive displays an astonishing lack of understanding of the deregulation initiatives now underway in Ontario capital markets and economy. The commentary suggests that, given the continued buoyant economic conditions in the wealth business in recent years, the industry can cope with a heavy regulatory burden and, accordingly, regulators should abandon efforts at “mindless deregulation” and turn their attention to more rule-making.

This conclusion completely ignores the rationale for deregulation and rule streamlining and its positive impact on efficiencies in the investing process. The burden reduction exercise is an effort to identify obsolete, inefficient and duplicative rules and regulatory processes that add unnecessarily to costs and inconvenience for investors and corporate issuers. These costs weaken investor portfolio returns, the competitiveness of our capital markets and capital formation. The only justifiable restraint on streamlining efforts should be the corresponding negative impact on investor protection. An aggressive deregulation agenda would not interfere with completion of the client-focused reforms, as regulators have already indicated. Indeed, emphasis on efficient rules and regulatory processes should be a continual effort by the regulator, regardless of conditions in the marketplace, effectively embedding scrutiny of rules as part of the regulatory culture.

The present effort at deregulation is timely because regulations and rules have accumulated at a rapid pace as markets have gone through massive reform, with many new rules not subject to sufficient cost-benefit and impact analysis. Moreover, evolving investor preferences and behaviour, and changes in market structure demand ongoing rule review to create a more efficient and simplified rule framework. Even the registration categories themselves, stratified into different silos with differing investment products and advice options are increasingly an anachronism in today’s integrating wealth platforms.

Securities regulators and governments are right to embrace comprehensive burden reduction and streamlining in our marketplace. Investors and issuers demand nothing less than a full effort.

Ian Russell
President and CEO, Investment Industry Association of Canada (IIAC)