Investment industry cautiously optimistic about new SRO plan

Advisors, MFDA, IIROC, and PMAC applaud CSA's plan to create single regulatory organization

Investment industry cautiously optimistic about new SRO plan

Initial reaction to the Canadian Securities’ Administrators (CSA) announcement to create a new, single self-regulatory organization (SRO) for Canada’s investment industry was cautiously optimistic in all quarters.

The Mutual Fund Dealers Association of Canada (MFDA) and Investment Industry Regulatory Organization of Canada (IIROC) issued a joint news release applauding the CSA’s decision and noting it “represents meaningful and impactful changes that will foster an innovative and competitive industry, deliver value for investors and is fully supported by both the MFDA and IIROC”.

MFDA and IIROC said the move will enhance investor protection and create significant efficiencies for industry participants, while also being important for Canadians’ financial futures. They said they’re looking forward to working with the CSA to create a new, enhanced pan-Canadian SRO to better protect investors, increase access to advice, and support innovation.

The Portfolio Management Association of Canada (PMAC) also released a news release stating it’s pleased the CSA was responsive to stakeholder feedback in developing its final paper. It was particularly happy CSA decided to defer any consideration of broadening the new SRO’s mandate between the regulation of investment and mutual fund dealers as it felt that the CSA’s current regulation of portfolio managers was effective.

Advisors approve

“It’s a good idea. A lot of people I work with and firms I know definitely want something like this,” said Jason De Thomasis, the chief compliance officer at De Thomas Wealth Management. “But I wouldn’t want to hold my breath because it’s been promised a number of times.”

De Thomasis applauded the fact the CSA was taking the lead, so he was cautiously optimistic it would proceed. He particularly liked the idea that there’d be one set of policies to manage rather than having to interpret nuanced differences between the two regulatory groups. 

“Canada needs a national regulatory body. I think we’re the only G7 country that doesn’t have a national regulator,” said David Little, senior financial advisor and director of Blue Oceans Private Wealth, noting the current system is very expensive. “We can’t have 12 jurisdictions that everybody needs to apply to and abide by when you can just have one. So, it would definitely be something very positive for the industry.”

However, he also hoped the playing field for those governed by the two existing organizations would be levelled for both licensing requirements and incorporation, given that IIROC advisors are not allowed to incorporate while MFDA advisors are.

“It does create a problem on many fronts, not being able to reinvest the money back into the practice,” said Little, adding that the realtor industry was just granted permission to be incorporated. “We’re the only ones that aren’t allowed to.”

“It will be interesting to see how this plays out,” he concluded. “Hopefully, it’ll bring some of the wish list into play here.”