No one is genuinely good at multi-tasking, and regulators are no exception. So, if they’re to focus on one thing this year, let it be the remaking of the self-regulatory structure.
The 2022 list of regulatory “priorities” is seemingly endless. Yet, for both advisors and investors, none is more important than self-regulatory reform:the rules that govern routine interactions between the industry and most retail investors represent the heart of investor protection.
Simply merging the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) would be tricky enough, but the regulators rightly have bigger ambitions. Their aim isn’t simply to thin the crowded regulatory landscape and placate the dually licensed firms that have long been frustrated with the two-SRO system. Instead, the Canadian Securities Administrators (CSA) want to create a new entity that better integrates investor representation and serves the broader public interest.
These larger goals require more time and resources than simply banging together IIROC and the MFDA and calling it a day. And the regulators already have their hands full with a long list of crucial policy initiatives, including developing climate risk disclosure standards, modernizing regulation and facilitating innovation. The Ontario Securities Commission is even more stretched, with an expanded mandate and governance and organizational changes underway, not to mention the prospect of new securities legislation.
Amid all this, the CSA has set an ambitious year-end target for bringing together IIROC and the MFDA in a new, public interest-focused SRO. Yet, securities regulators don’t have a great track record when it comes to timely execution. Their initiatives have a way of dragging on and creating needless uncertainty for the regulated, while leaving the risks that their policy efforts aim to address unresolved.
The SRO file should not be allowed to languish, and nor should it be rushed through without adequate care and attention. While the idea of moving to a single SRO model has been around for years, the current effort represents the one chance to get it done.
The CSA has finally determined that SRO reform is worth doing. Now, they need to ensure it’s done right.