What to expect from your new SRO

With its new ability to focus strictly on regulation, many IDA members might well be wondering what direction the industry’s self-regulatory organization will take and what systems will be overhauled, particularly in the wake of the proposed merger with Market Regulation Services (RS).

In one of his last speeches at president and CEO of the Investment Dealers Association, Joe Oliver told IDA members, now members of the Investment Industry Association of Canada (IIAC) following the trade association’s split from the IDA, about committee changes, the role of IDA District Councils, objectives the association has with regards to the Canadian Investor Protection Fund, ongoing progress on the RS merger front and how all those developments will impact dealers in the industry.

Going forward, the trade association says it plans to work closely with the IDA to provide feedback and industry advice on the rules coming out of the SRO. Although both entities agree this is a positive development, both are also faced with the task of marshalling volunteer support for two organizations instead of one. With that in mind, the IDA has disbanded the Regional Dealers Committee, the Equity Trading Committee and the Insurance sub-committee of Retail Sales. The equity trading committee reviewed proposals for regulatory and structural reform of domestic equity markets, while the insurance sub-committee operated as part of the Retail Sales group that provides advice and advocacy on policy issues, such as proficiency requirements, that relate to the retail side of the business. The remaining IDA committees will continue, but out of respect for volunteers’ time, the regulator says it will call meetings only as needed, to deal with specific policies.

“Policy committees play a critical role at the IDA because they bring industry expertise to bear on the development of regulatory policy. Input assures that policies are balanced and practical and that they work in the real world,” Oliver says. “If you are currently a [committee] member I urge you to stay engaged. If you are not, I encourage you to consider joining. It’s interesting to be involved in the policy process from the regulator’s perspective.”

In other news, Oliver says the IDA plans to eliminate Canadian Investor Protection Fund compliance visits to member firms and eliminate the fund’s role in setting capital standards. Both tasks are already part of the IDA’s mandate. The move to eliminate the extra layer of organization will bring the fund in line with other protection funds around the world, save costs for the SRO and member firms, eliminate some uncertainty and speed up rule making approval processes.

Similarly, ombudservices will soon be history. Last month, the board of the Canadian Financial Sector Ombudsnetwork voted to disband, “which will reduce costs and simplify the system for the public,” Oliver said.

Oliver also revealed that the IDA’s sale of CSI Global Education to ONCAP allowed the association to transfer $28 million, which will cover expenses for four years. “The proceeds will also reduce members’ fees at the IDA by over 40% a year for two years. Members’ costs are capped at 4% compound increase over five years.

Finally, Oliver touched on the issue of a single national securities regulator and the IDA’s pending merger with RS. “A single national member and market self-regulator will be a real achievement in the public interest. It will strengthen self-regulation and enhance our ability to protect investors, preserve market integrity and bolster an efficient and competitive capital market,” he says. “An obvious immediate savings will be to eliminate duplicative trade desk reviews.”

An executive search is currently underway for a CEO to run the consolidated IDA-RS SRO. IDA District Councils will retain their regulator role and policy input on region issues. The IDA and RS boards, currently comprised of 13 members each, will likely consolidate to one board of 13 members with an equal number of industry and independent directors, plus the CEO with representation for both the marketplace and buy side firms. Oliver says directors, as in the past, will be representative of the industry in terms of ownership, head office location, business model and size. Merger plans are expected to be finalized by the end of the summer and submitted to the IDA, RS and TSX Group boards and IDA member firms for approval.

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com