Don’t fear strengthened regulatory powers, industry told

(April 25, 2003) Members of Manitoba’s investment community were warned to brace for — but not fear — continued regulatory change at a “Meet the Regulators” conference yesterday in Winnipeg. Don Murray, chair of the Manitoba Securities Commission (MSC), told the 200 in attendance that increased regulation and checks and balances aren’t designed to hurt an industry already reeling from the three-year-old bear market.

Instead, developments such as the MSC’s newly granted power to order law-breaking advisors and their firms to pay up to $100,000 to aggrieved investors should be taken as a sign the industry is serious about improving its image with gun-shy clients.

“It’s a new arrow in the quiver, it’s not a new way of operating. This is not an insurance plan for investors,” he says.

Murray notes the MSC is the first securities commission in the country to be granted such restitutional powers. For any action to be taken, the commission must be able to determine the amount a client lost based on the evidence and draw a direct line between the loss and the conduct of the advisor or firm.

He notes the commission has only had two claims filed since the powers were granted in February — he could not discuss the specifics of either case — but he says he didn’t expect a rush of clients seeking their money back.

“We believe people are used to the fact you can lose money without trying to pin the blame on somebody,” he says. That being said, Murray didn’t sugar-coat the possible ramifications of an advisor or firm being found guilty of a major infraction. “You could be fined, suspended or have your registration cancelled,” he says.

With the $100,000 ceiling, Murray says the process is designed to help investors with small- to medium-sized accounts, not institutional players. Clients who make their claim through the commission lose the right to take their advisor or firm to court, he adds.

Alan Dunnett, chair of the IDA’s Manitoba District Council, says the new powers will only be used at the end of the grievance procedure. “There isn’t a gaping hole in the client complaint process. It was thought to be a necessary final backstop for clients who don’t have the means or inclination to obtain restitution,” he says.

Both Murray and Dunnett note the majority of cases that do end up before the MSC panel involve unregistered representatives and not advisors of IDA member firms.

But that’s only a taste of the changes to come. Stephen Sibold, chair of the Canadian Securities Administrators (CSA), told the conference it’s on schedule to deliver a new uniform securities act by the end of this year and the new rules could be enacted as early as next spring.

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The goal of the CSA’s uniform securities legislation project is to create one set of streamlined securities laws across the country, rather than the current mishmash of rules and regulations used by the 13 provincial and territorial securities commissions.

The end result of creating a “one-stop shopping” environment will allow securities firms and their advisors to register in just one jurisdiction, rather than in every one in which they conduct business. The reduction in red tape will also lower costs, Sibold says, and encourage more companies to go to the market to raise capital.

“That will lead to more robust capital markets, which are an engine of economic growth. The spin-off benefits will be enormous,” he says.

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Geoff Kirbyson is a writer based in Winnipeg.

(04/25/03)

Geoff Kirbyson