(November 8 – 16:20 ET) – In a speech to the Strategy Institute’s Fund World 2000 Conference today, Glorianne Stromberg, former commissioner of the Ontario Securities Commissioner, took regulators to task for their lack of action on fund governance issues in Canada.

Stromberg stressed that governance is not a luxury or an extra, it is essential for a credible capital market.

Alluding to a series of recent industry scandals she said, “As the events of the last several months have shown, deficiencies in fund governance matters have very practical adverse consequences for investment funds, the investors and participants in these funds, and for the sponsors of the funds. These deficiencies undermine the integrity of the Canadian capital markets. They undermine the credibility of the Canadian marketplace as a place to invest. They undermine confidence in Canada’s regulatory system and in its regulators.”

Stromberg also points out that poor governance hurts returns. “Technology has made it possible to identify and measure shortfalls in performance that are attributable to lack of effective governance. These shortfalls are costing Canadian investors, both large and small, dearly. It likely will not be long before there are people seeking to recover this difference.”

The lack of Canadian fund governance requirements is not news to regulators. It was highlighted, Stromberg notes, in her first report on the investment fund industry in 1995, and again in her second report a couple of years later. “It is unfortunate that the vision and leadership of industry leaders, regulators and government policy-makers has not been sufficient to move the matters forward.”

However she says it is “encouraging” that regulators have commissioned and received the Erlichman Report, by Fasken Martineau DuMoulin lawyer Steve Erlichman, that gives them yet another platform to address governance issues. Yet she stresses, time is being wasted. “In the meantime, while regulators continue to deliberate and consult and to do whatever else regulators do, serious cracks are appearing in the investment fund industry.”

Stromberg goes on to tackle some of the basic issues surrounding fund governance, concluding with a call to action. “Continued failure to deal with these issues in a timely and effective manner is bound to encourage people to look for other investment alternatives. In addition to increasing exposure to systemic vulnerabilities, we are missing real opportunities to enhance investment performance.”