IDA to implement conflict of interest guidelines regarding emerging companies

This morning in Toronto IDA president and CEO, Joe Oliver, told delegates at the IDA’s annual conference that the IDA has already implemented some of the guidelines although they have not yet been formally approved by regulators. The IDA is just finalizing the rules, implementing some changes recommended by the regulators. However, it already has board approval, so it can go ahead with the new rules without going back to its board after making the necessary “minor wording changes”.

The guidelines the IDA will adopt were initially produced by a committee consisting of the IDA and then-four Canadian stock exchanges, chaired by John Hagg, CEO of Northstar Energy Corp. They deal with the role of brokers acting as investors in the financing of emerging companies. It found that investors weren’t always treated fairly by this process and that brokers sometimes abrogated their fiduciary responsibilities in favour of their own interests.

Several firms, First Marathon Securities Ltd. in the mining business, and more recently Yorkton Securities Inc. in the emerging high tech world, have come under fire for their employees’ involvements with startups.

The Hagg Committee recommended more comprehensive client preference rules and the expansion of existing conflict of interest rules that impose restrictions on trading and underwriting by member firms. It also said that industry executives should be held accountable. The new IDA rules will see it taking an active oversight role to ensure the new guidelines are followed.