The merger of two self-regulatory organizations that oversee Canada’s investment industry is heading into the last stages of approval, with regulators announcing the final framework and a new board of directors.
The Canadian Securities Administrators (CSA), an umbrella organization of provincial and territorial securities commissions, on Thursday released the names of proposed board members for the new self-regulatory organization. It will combine the functions of the Investment Industry Regulatory Organization of Canada (IIROC), which supervises securities dealers, and the Mutual Fund Dealers Association of Canada (MFDA), which oversees 90 mutual fund dealers.
The CSA also revealed the names of board members for a new, single investor protection fund for the industry and released for public comment several documents outlining the structure of the new organization and fund.
“Today’s announcement of the new boards and publication of draft documents marks a major milestone toward our goal of creating a new [self-regulatory organization] and [investor protection fund] that serves a clear public interest mandate, better protects investors and promotes public confidence,” CSA chair and CEO of the Autorité des marchés financiers Louis Morisset said in a statement.
The public comment period, which is open until June 27, is one of the final steps in consolidating IIROC and the MFDA, as well as creating one investor protection fund by combining two existing funds – the Canadian Investor Protection Fund (CIPF) and the MFDA Investor Protection Corporation. The fund will be independent of the new organization.
The two self-regulatory organizations have long been criticized by investor advocates and the investment industry for overlapping areas of oversight, as more wealth managers serve customers who buy both mutual funds and individual securities. In 2019, the CSA began to review the “regulatory framework” governing both IIROC and the MFDA and, after industry consultations and several proposals, a new self-regulatory organization plan was formed.
The yet-to-be-named organization is expected to be in place by Jan. 1, 2023.
The proposed organization will have a different governance structure than IIROC’s and the MFDA’s, with stronger accountability to the CSA and a more diverse board. It will initially include investment dealer and mutual fund dealer registration categories as well as marketplace members.
The potential to incorporate other registration categories – such as exempt market dealers and portfolio managers currently overseen directly by members of the CSA – will be considered as part of a separate phase.
The proposed framework plans to eliminate duplicative costs and minimize regulatory inefficiencies; promote access to advice for all investors; reduce investor confusion; streamline the complaint process; increase controls and improve transparency of enforcement mechanisms; and enhance market surveillance, among other measures.
The proposed board for the new self-regulatory organization will consist of 14 members, a majority of them independent directors, including new chair Tim Hodgson, a former financial services executive who currently serves as the chair of Hydro One. The new organization’s chief executive officer, who will be the final member of the board, is expected to be named in the “coming weeks,” the CSA said in a release.
The new investor protection fund board will also consist of 14 members, including new chair Donna Howard, the current CIPF director and chair, and vice-chair Dawn Russell, the current MFDA Investor Protection Corporation director and chair. The new fund’s chief executive officer, who would be the final member of the board, is expected to be named in the third quarter of this calendar year.
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Clare O’Hara