IIROC’s Andrew Kriegler is the new SRO CEO, but its executive board has yet to be announced.CHAD HIPOLITO/The Canadian Press
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While investment industry stakeholders welcome the launch in January of a single self-regulatory organization (SRO) resulting from the amalgamation of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), some still have some reservations.
Nelson Cheng, president and chief executive officer of Sterling Mutuals Inc. in Windsor, Ont., says membership fees – particularly where they’re going to end up – are top of mind for his mutual fund dealer.
Although next year’s dealer fee schedule has already been published, he’s curious about what fees will be like in the coming years. He notes that IIROC’s fees for investment dealer members are generally based on revenue while the MFDA’s fees for mutual fund dealer members are based on assets under administration. Under IIROC’s model, Mr. Cheng says Sterling Mutuals’ fees would be a lot lower than what they’re at now.
“There should be some cost savings. I suspect some dealers on the IIROC side may end up paying a bit more and some on the MFDA side might pay less,” he says. “It remains to be seen what their final fee schedule will look like.”
Laura Paglia, president and CEO of the Investment Industry Association of Canada in Toronto, says the new SRO will eliminate “regulatory redundancy,” but to serve investors better, it will need to move well beyond traditional approaches.
The new SRO is expected to launch an investor advisory panel to advise on issues related to investors. It’s something Ms. Paglia hopes it will “embrace fully in its role of supporting all-inclusive financial planning for individuals and households.”
The new SRO, which is still to be named, received formal approval from the Canadian Securities Administrators last month. The merger of two SROs means investors will gain easier access to different products from one source. They will no longer have to switch firms or advisors for the privilege of accessing specific financial products.
“A lot of us are quite enthusiastic for the change as [the new SRO] would allow us to offer more product lines to our customers,” says Mark Kent, president and CEO of Portfolio Strategies Corp. in Calgary.
“The current approach was quite limiting for mutual fund dealers to offer exchange-traded funds. It doesn’t make a lot of sense to have two SROs when we have effectively met in the middle from a product offering standpoint.”
The new SRO will also bring a diverse group of dealers together, says Matthew Latimer, executive director of the Federation of Mutual Fund Dealers (FMFD). “We think [the new SRO] has a lot of choices in front of it that are critical to the industry’s future.”
By choices, Mr. Latimer is referring to a few consultation projects the new SRO is expected to tackle in 2023 – from implementation issues around advisor incorporation, investigating margin accounts for clients, and creating a level playing field for all dealers with representation for all the various stakeholders. That last point is a particular issue for the FMFD, Mr. Latimer says.
“Our association’s concerns are mostly around retaining our character,” he explains. “We have the mainstream channels for advice, distribution and financial planning. And we want to be heard in a crowd of a much larger group of firms. There are concerns from all the groups about retaining their access, voice and ability to be heard.”
Specifically, Mr. Latimer would like to see one of the planned advisory committees be dedicated to smaller dealer firms. Mr. Latimer notes that the 88 small dealers represent 75 per cent of the non-bank-based mutual fund registered representatives in Canada.
Although IIROC’s head Andrew Kriegler has been named the new SRO’s CEO, the executive board has yet to be announced. Mr. Kent says he would like to see good representation on the mutual fund side.
“I hope for the best of both worlds, the best people from IIROC and the best people from the MFDA – not necessarily the people who have been around the longest,” he says.
Mr. Kent would also like clearer guidance on the dealer application process before the Jan. 1 official launch date.
“They’re supposed to have a fast-track process for existing dealer registrants like us but we’ve still not seen it and, yet, this is all supposed to happen in the new year,” he says.
“You will still have a lot of advisors, particularly older advisors, that just want to use mutual funds. They don’t want the extra paperwork or costs and don’t want to take any new exams.”
But then you have younger up-and-coming advisors who need that registration to offer equities, he adds.
Overall, Mr. Kent is pleased the new SRO is well on track to start in the new year. “[All of us in the investment industry] are so glad to see it done in record fashion,” he says.
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