In a speech to the Toronto Society of Financial Analysts on Tuesday, Investment Dealers Association president and CEO, Joe Oliver, outlined the IDA’s plans for raising analyst standards in Canada.

The IDA, the Toronto Stock Exchange and the Canadian Venture Exchange have been looking at analyst standards for two and a half years, since the creation of the Securities Industry Committee on Analyst Standards, led by Purdy Crawford.

Although the current furore surrounding analysts comes out of the tech stock meltdown and the Enron debacle, this committee came out of the now-distant Bre-X Minerals scandal.

Last November, the final report of the committee was tabled. It contained 33 recommendations, 18 of them requiring specific action by the IDA. In response, the IDA established a five-person board steering committee, and worked with its staff to create draft Policy 11. “Ultimately, our objective in drafting Policy 11 is to address investor confidence through the appropriate and effective management of conflicts of interest,” Oliver said.

Under the policy, IDA member firms will be required to adopt conflict of interest policies that minimize conflicts, and the IDA will set new requirements for disclosure of the firm’s and the analyst’s ownership of securities

Firms are banned from issuing a research report prepared by an analyst if that analyst serves as an officer, director or employee of the issuer, and member firms must disclose in research reports whether the analyst received compensation based upon the firm’s investment banking revenues in the previous 12 months.

Firms are prohibited from providing any compensation to an analyst if that compensation is directly based upon a specific investment banking service transaction in the previous 12 months.

However the policy won’t require that analysts be registered.

The IDA will implement analyst standards through a combination of requirements and guidelines drafted as “best practices”. Although they are identified as guidelines, the IDA intends to review and approve all firm policies.

IDA policy will also attempt to deal with “quality assurance”, an area that has not been addressed in the U.S. by NASDR. Among other things, the IDA guidelines will say that firms should require analysts to obtain the Chartered Financial Analyst designation, and that firms should make their analysts’ research widely available to all of their clients simultaneously.

“These are, in our view, tough, comprehensive and practical rules that will protect investors and go a long way to dealing with conflicts of interest,” Oliver concluded.