Industry self-regulator announces initiative toward ‘bold new vision’ of fundamental reform to promote public interest
To support ongoing consultations toward the fundamental reform of Canada’s framework of securities industry self-regulation, which were initiated by the Canadian Securities Administrators (CSA), the Mutual Fund Dealers Association of Canada (MFDA) has begun developing a design and implementation roadmap to create a new single self-regulatory organization (SRO).
“Our goal is to empower and assist all stakeholders – investors, industry, regulators and governments – in envisioning a clear path toward a new SRO driven first and foremost by the public interest, and underpinned by sound governance, industry expertise and responsiveness to investor and market needs,” MFDA President and CEO Mark Gordon said in a statement. “The MFDA hopes its work will assist CSA members in their continuing consultation and review of the SRO framework in Canada.”
Referring to a special report it released in February last year, the MFDA said the new organization it envisions – which the report referred to as “NewCo” – offers a wide variety of benefits, including increased public confidence, regulatory burden reduction, and enhanced governance and accountability.
Under its proposed single-SRO framework, MFDA said NewCo’s regulatory authority over its members would include registration, business conduct standards, prudential matters, policy and rule development, and enforcement. Its board of directors would include representatives from three stakeholder groups consisting of industry participants, public/independent persons, and nominees of CSA members.
The roadmap, which the MFDA said it will provide to the CSA and all interested stakeholders upon completion, aims to offer concrete steps and a realistic timeline for the creation of a single self-regulatory entity.
“A simple merger of the MFDA and the Investment Industry Regulatory Organization of Canada, with their respective legacy challenges under an outdated framework, will not generate meaningful cost savings and regulatory burden reduction while instilling greater public confidence in our regulatory system,” Gordon said. “Instead, a bold new vision and open and inclusive collaboration between the two organizations, as well as the CSA, investor advocates and market participants are necessary to create meaningful and lasting change.”
The benefits and guiding principles outlined in MFDA’s 2020 proposal align with recommendations made in the Ontario Capital Markets Modernization Taskforce’s recently released final report. Among more than 70 recommendations, the taskforce encouraged the Ontario government as well as the CSA to work toward the creation of a “new single SRO.”
The taskforce report proposed a two-phased approach toward the adoption of a single SRO. The immediate-term objective would be to create a new single SRO that regulates both investment and mutual fund dealers, which would continue to conduct national market surveillance. In the longer term, following the creation of the new SRO, the taskforce said the OSC Board should formally determine whether the new SRO’s oversight functions can be extended to other firms directly regulated by the OSC such as exempt market dealers, portfolio managers, and scholarship plan dealers.
