Super SRO for industry to decide, says MFDA boss

(July 29, 2004) The financial services industry will decide whether or not Canada’s self-regulatory organizations should merge, says the head of the MFDA. But Larry Waite says he personally believes a single SRO might be the right way to go.

IDA president Joe Oliver floated the idea of combining the IDA, MFDA and Market Regulation Services (RS) at the IDA’s annual conference earlier this summer in Quebec.

“We could create a single organization that would be functional for more fair, efficient and effective self-regulation,” said Oliver, arguing that a combined SRO would “enhance the competitiveness and reputation of the Canadian capital markets.”

“I haven’t discussed it with my board, but my own personal view is that it would make a lot of sense to have one SRO, just as it would make a lot of sense to have one national securities commission,” Waite said in a recent interview.

However, Waite notes that the idea of a merger was discussed, and rejected, by the boards of both the IDA and the MFDA about a year-and-a-half ago.

And there’s also the question of the different cultures at the SROs, Waite adds, noting that a merger, if it happens, is still a long way off. But that won’t stop the three organizations from working together on various projects in the meantime, Waite says, pointing out that he meets with IDA senior vice-president Paul Bourque and RS president Tom Atkinson on a regular basis.

On other issues, Waite says the MFDA is making progress on a decision on whether it should set up its own investor protection fund, or join the established Canadian Investor Protection Fund (CIPF).

Working groups from the CIPF and the MFDA have been meeting regularly for the past two months, he says, with the expectation that a recommendation will go to the board in the fall.

The MFDA is also working with securities regulators on a couple of fronts. First, the fund dealer group is helping the Ontario Securities Commission as it looks into business arrangements between IDA and MFDA firms, such as omnibus accounts.

“There’s an investor protection concern and a regulatory concern that we all share and we’re trying to come up with a solution,” Waite says.

The MFDA is also involved in the OSC’s investigation of market timing and late trading, although Waite says he doesn’t know when the commission will issue a report on the topic.

In addition, the MFDA is building its enforcement branch — with Waite predicting that the first enforcement proceedings will take place by year’s end — and is continuing the ongoing work of compliance reviews of dealer firms, scheduled for completion in 2005.

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