The Investment Funds Institute of Canada has released comments on the latest revision of the federal Capital Markets Stability Act (CMSA) consultation draft issued in May. Clarifying that its ability to provide thorough feedback remains limited, the association pointed out some significant issues that remain.
“The industry appreciates clarifications that have been made to the definition of systemic risk, including the addition of a materiality qualifier,” remarked Joanne De Laurentiis, IFIC president and CEO. “However, the new draft authorizes the regulator to designate products or practices as systemically important or systemically risky without any requirement that the regulator consult with the affected firm or firms in advance of such a designation. The draft is also missing an express right of appeal and mechanisms for reversal or withdrawal of a designation. The CMSA should be amended to include these rights and remedies.”
The IFIC submission encourages an expansion of the Capital Markets Regulatory Authority’s mandate. Specifically, they recommend including language that supports fair, efficient and innovative capital markets, which would make it consistent with that of several provincial regulators.
Noting that responding to requests for data can be labor-intensive and expensive for individual firms, the association also suggests a requirement to consult with the industry to establish a standardized process for managing all aspects of any information-gathering requests.
Another point the submission takes issue with is the CMSA proposed approach to vicarious liability, which would make the investment fund manager fully liable for a violation committed by an investment fund. Certain mutual funds assign some management functions to a trustee or other service provider, who may assume sole responsibility for those activities. According to the IFIC comments, the language of the draft legislation does not take that into account.
“An undertaking of this magnitude requires significant efforts by all parties,” De Laurentiis said. “IFIC is committed to working with the federal, provincial and territorial governments to create a solid, workable framework that will serve the needs of both investors and the investment sector.”
IFIC challenges IIROC proposals