SRO merger talks

The head of the MFDA has left the door open a crack to the possibility of a merger with the IDA but says the time is not yet right to discuss such a tie-up.

“Further discussions are inevitable and should happen. Whether they lead anywhere, I don’t know the answer to that,” said MFDA president and CEO Larry Waite, speaking at Dialogue with the OSC on Friday. “From our board’s point of view, we want to wait and see how the IDA/RS merger falls out and where the dust settles with that.”

In a panel discussion on the changing SRO landscape, Waite said he sees little overlap between the IDA and the MFDA but admits that operational efficiencies may be found.

“I’m certainly not saying that this won’t happen; I’m saying that there will be discussions at the appropriate time,” he said. “I personally think there should be discussions.”

Fellow panelist Ed Waitzer, senior partner at Stikeman Elliott, agreed that it is too early to enter discussions on such a deal, since the combination of the IDA and RS is still underway.

“Larry’s absolutely right. There is not enough overlap and to have even thought about trying to combine three organizations — some of us think we should have had our heads examined for taking on trying to combine two — we’ve got to demonstrate that it works,” said Waitzer. “If I were a director of the MFDA, I’d be sitting back saying ‘show me.'”

The combination of the IDA and RS will provide the regulator with a more holistic view of the market, according to Paul Bourque, senior vice-president of member regulation, IDA. The merger brings together RS’s analysis of alerts from market surveillance and the IDA’s analysis of information from the complaints and settlements regime (ComSet).

“You put those two together and you start seeing things you wouldn’t have seen before,” said Bourque. “You might have missed a volume of trading that was quite low but was responding to some new product introduction and sales literature.”

The theoretical benefit of a single national SRO, encompassing both the securities and mutual fund industries, is that it could earn enough confidence from the CSA to be allowed to set its own policies and rules through a dynamic and responsive self-certification regime, Waitzer said.

“It’s that single point of contact, a single point of accountability, more transparency for the industry itself,” he said. “For the investor, there’s more clarity about who’s doing what, and for the oversight bodies, they know where the buck stops with respect to self-regulation.”

Waite pointed out that the single SRO would also make the complaints process easier for investors, who too frequently do not know where to turn.

“I think from an investor clarity point of view, there are huge benefits,” said Waite. “There is investor confusion out there. They don’t know whether to go to the IDA or the MFDA.”

Waitzer takes an even broader view: “Having that organization being the single point of focus for investors, for the industry, and being the single face for self-regulation internationally — you can see some potential benefits from getting there. Whether we get there or not, time will tell.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com