Corporate mergers are notoriously difficult. In the case of the Canadian Securities Administrators’ (CSA) effort to craft a new self-regulatory organization by combining the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), investors stand to suffer if things go off the rails.
The distractions that come with mergers impose an opportunity cost: it can be difficult for organizations to keep up with their day-to-day responsibilities, let alone plan for the future, when new administrative demands are stealing a huge share of resources and attention.
Already, policymaking risks stalling in anticipation of the new SRO’s launch at the end of the year. Planning for new initiatives is understandably difficult when the future is uncertain.
But in the meantime, reforms that could be enhancing investor protection — such as IIROC’s plan to introduce a mechanism for returning ill-gotten gains to harmed investors — may be slowed.
These disruptions may be justified by the outcome. If the merger results in a more robust, investor-focused SRO, then short-term distractions can be forgiven.
However, if the new SRO becomes a bigger version of the existing bureaucracy, the disruption is less forgivable.
So far, things appear to be on track. The CSA has kept to its timetable in naming a board for the new SRO and publishing interim rules that will apply when IIROC and the MFDA are first consolidated.
That’s the easy work, though. The tricky part of putting the two organizations together must soon begin in earnest. Hopefully, investors don’t suffer and regulators don’t discover that what looked good on paper is much tougher to achieve in real life.