In the regulatory world, progress is often measured in years, if not decades. By that yardstick, the initial returns from self-regulatory reform in the retail investment business are promising. Needless bureaucratic barriers between investment dealer and fund dealer businesses have begun to fall, enabling the first wave of firms to secure dual registration under the Canadian Investment Regulatory Organization (CIRO).
The hard work of combining two sets of dealer rule books also is well underway. CIRO has published two of five planned tranches of proposals to harmonize existing rules into a single rule book. And it’s begun tackling another key disparity:the ability of fund reps to use personal corporations, an option investment dealer reps don’t have.
This important policy work is being undertaken amid the daily business of market and dealer regulation, making the progress to date an even greater achievement.
But as this new regulatory landscape is crafted, investors cannot be forgotten. The work of upgrading the industry’s plumbing is both needed and welcome. However, much of it will be lost on investors, who generally have little idea about the content of the rules or the people who enforce them.
The protection of investors and the preservation of market confidence are among the primary justifications for erecting a regulatory framework in the first place. CIRO should recognize the room for improvement here too.
The rule book rewrite shouldn’t simply be an exercise in slimming down the volume of regulations — eliminating the overlaps and disparities that represent unwanted sand in the gears of commerce. Rather, the project should be treated as an opportunity to remake the rules for the benefit of investors by closing the often wide gaps among investor expectations, industry practices and regulatory realities.
While the early returns from CIRO’s creation look promising for industry firms, there’s plenty of value to be realized for investors.