IDA proposes organizational spin-off

The IDA board has endorsed a proposal to spin-off off its trade association function into a separate organization and focus solely on self-regulation.

Critics have long complained that advocating for, and regulating brokers and dealer firms creates potential conflicts of interests.

In the past, IDA president Joe Oliver maintained there was no inherent conflict in the association’s structure, but says times have changed.

“We continue to believe that the dual structure provides a substantive advantage to the association but along with that there’s an optical problem,” Oliver conceded in an interview. “Perception has been evolving over the last few years — there’s more focus on independence and conflicts of interest.”

“We feel there’s an advantage in being proactive and being responsive to what people are thinking,” he adds. “We felt we had reached the tipping point where the optical issues were starting to become problematic.”

Oliver, who has been travelling the country explaining the proposed change to member firms, expects that the new trade association will be housed in a different building with a separate board of directors.

“We have about 300 staff, and maybe 25 people will move , let’s say. We devote about 15% of our budget to the trade association, so structurally it’s not going to have a huge impact but from a mandate point of view it’s a fundamental change.”

Oliver plans to stay in his current role on the regulatory side. Additional meetings will be held with member firms and a vote is expected in mid-December. If a majority of the IDA’s approximately 200 firms approve, the restructuring plan will go forward.

“They finally figured out that they can’t row and steer at the same time,” says investor advocate Robert Kyle, a staunch critic of the association. “But it’s a good step, it will relieve the public of thinking there’s conflict if they are truly separated.”

Still, Kyle feels the regulatory environment won’t change significantly until Canada’s SROs get legislative power to enforce rules.

“The IDA has a contract with its members, not with the public or the government. Therefore, the public won’t be protected whether the IDA separates or not. The SROs still do not have the proper tools to do the job.”

Oliver notes that spinning off the IDA’s trade association function could also help advance plans to merge the country’s three SROs.

“This removes an impediment. We couldn’t have done the merger without moving on this issue but that doesn’t guarantee that it’s going to happen,” he cautions. “In fact, the MFDA board has recently rejected our overtures, so what we’re doing now is focusing on the opportunities with [stock market regulator] RS.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com