This article appears in the June 2023 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
The newly christened Canadian Investment Regulatory Organization (CIRO) is working through a packed agenda as it strives to harmonize continuing education (CE) requirements, advisor incorporation rules and discipline.
“Hopefully, in a couple of years, we’ll have a consolidated rule book,” said Andrew Kriegler, inaugural president and CEO of CIRO. “But we brought the enforcement groups together under common leadership, and that [makes it] much easier to start mapping out a plan on how to integrate the operations going forward.”
CIRO plans to publish a road map by summer or early fall for combining its three existing rule books: investment, mutual fund and universal market integrity.
“One of the big reasons [CIRO was formed] is to take down some of those historical and somewhat arbitrary silos that existed from the two parallel regulatory worlds,” Kriegler said. “There is a lot more to do over the course of the next several years, in partnership with our Canadian Securities Administrators colleagues, to make the system better.”
Kriegler, 59, was president and CEO of the Investment Industry Regulatory Organization of Canada (IIROC) from 2014 until it merged with the Mutual Fund Dealers Association of Canada (MFDA) to form CIRO on Jan. 1.
CIRO inherits a regime in which mutual fund advisors can direct their commissions or fees to a corporation, which can have tax and estate planning benefits, but investment advisors cannot. Kriegler said CIRO is considering either applying the existing directed-commission rules for mutual fund reps to investment reps or creating a consistent system nationally. The latter option cannot be accomplished with a simple rule change, however.
“Depending on how you want to pursue it, it might even require legislation,” Kriegler said.
CIRO also is working with provincial regulators to obtain authority to collect fines and compel witnesses to co-operate, as well as protection from malicious lawsuits. CIRO has at least one of these tools in every province and territory, but has all three tools in only six provinces.
“We’ve already had the majority of the provinces in the country give us everything that we need to do the job properly and we’re going to work with the rest of them,” Kriegler said.
“We also need to comprehensively look at what the CE requirements should be for the various categories of registration, and how they should evolve,” he said, adding that CIRO eventually will have one set of CE requirements. “But we don’t want to introduce disruptive change in a way that will harm the ability of the industry to serve customers.”
In 2020, an analysis by Deloitte LLP estimated the self-regulators’ merger would save $380 million–$490 million in costs over 10 years — all based on the savings generated by dual-platform dealers that will be able to rationalize their back offices.
By contrast, the merger is anticipated to cost $25 million–$39 million. Much of that will be financed by a new fee levied on dual-platform dealers, as well as on stand-alone firms that decide to become dual-registered while the integration bill still is outstanding.
“I think the big opportunity for efficiencies is in the industry as opposed to inside the combined regulatory organization,” Kreigler said. “The big bang for the buck is by allowing firms to structure themselves efficiently.”
But combining an investment dealer with a mutual fund dealer is a major undertaking, and only one firm has been approved to do so thus far. (In September, estimates showed that 29 of IIROC’s 174 dealers and 26 of the 86 MFDA dealers would be likely to pay the fee for dual-platform dealers.) Each firm could have thousands of reps, plus separate systems, policies and procedures, Kriegler said.
“So this is a big exercise and firms want to plan for it, at the right time,” he added. “If you are going to consolidate systems — and I know this, having worked in large financial institutions in the past — you want to do it on a timeline that makes sense, like when you’re already going to be doing a major upgrade, for example.”
Kriegler grew up in Ottawa and selected his career during his final year at the University of Toronto’s Trinity College, where he earned a bachelor of science in economics and computer science. In late 1985, while waiting to meet friends in the student lounge, Kriegler began reading a Morgan Stanley recruiting brochure.
“I started flipping through it and I went, ‘This is the industry I want to be part of.’”
Within a year, he bought a plane ticket to New York after hearing from a former classmate about job openings at Goldman Sachs. Before leaving, he called his classmate’s boss: “I said, ‘I’m going to come to New York next Monday, and if you don’t want to see me, then tell the security guards not to let me in. Otherwise, I’m going to be there at 9 a.m.’ And for whatever reason, the chutzpah worked. He let me in, I got an interview and I got the job.”
Kriegler returned to Canada in the late 1980s to earn an MBA from Western University. Following that, he worked for several of the Big Six banks as well as Moody’s Corp.
“I had worked throughout the decades in regulated financial services in one way, shape or form, where I had a lot of relationships with regulators,” Kriegler said. In 2013, he joined the Office of the Superintendent of Financial Institutions (OSFI), rising quickly to the role of deputy superintendent.
In 2014, “the day Jeremy Rudin was announced as the superintendent [of OSFI], the phone rang and it was IIROC calling, asking if I would be interested” in the role of president and CEO, Kriegler said.
Looking to the future, Kriegler said he understands the industry’s impatience regarding self-regulatory harmonization.
“It’s fair to expect us to do that as quickly as humanly possible,” he said. “But there’s also another job. … We also have the same [integration] tasks as any two organizations that come together,” such as merging business systems and combining the cultures of the two former self-regulators.
“We have a big job to do over the course of the next couple of years,” Kriegler said. “That’s not where it ends. In some ways, when we finish the integration, that’s where it starts.”