Rules being phased in from January 1 will make it 'flexible and easy' to become dual-registered firm
Dealers are welcoming the MFDA-IIROC merger into the "New SRO" next year, though there may be a few bumps along the way as it amalgamates the two organizations’ rules into a single agency.
“It’s largely a positive thing for the industry. But, like any major industry-wide initiative, there will be headaches and challenges that come with it because this is a fairly large-scale merger,” Gillian Kunza, co-founder and chief executive officer of Designed Securities Ltd., and one of The Best Financial Advisors and Professionals Under 40 in Canada, told Wealth Professional. Her umbrella organization, which holds membership in both MFDA (Mutual Fund Dealers Association) and IIROC (Investment Industry Regulatory Organization of Canada), approved the merger.
Kunza, who has seen a similar organizational merger in the accounting profession, added, “there are so many elements, multiple streams, to bring together with these investment industry governing bodies that it’ll come with growing pains.”
Read More: MFDA and IIROC green light creation of new SRO | Wealth Professional
Kunza said that, even though the New SRO (self-regulatory organization) will begin on January 1 next year, it will have a phased-in approach as the various policies and procedures are aligned.
“It’s not like, come January, you suddenly have one rulebook and one enforcement group and one of everything,” she said. “January marks the official time period when we start seeing small areas come together.”
Read More: New SRO must ‘provide a better investor experience’ | Wealth Professional
Natasa Morfesis, vice-president of compliance for Worldsource Wealth Management Inc., which is also a dual MFDA and IIROC member, also lauded the move, saying Worldsource voted for it.
“The fact that everyone overwhelmingly approved this new merger just shows how much dealerships wanted this as the new go-forward,” she told Wealth Professional. “I honestly can’t say anything negative about something we’ve all been hoping for for decades.”
Morfesis noted that Worldsource believes the move to the New SRO will be a win for everyone. “We believe that a consolidated rulebook and clarity for clients, specifically, are a positive move forward. We believe our advisors will benefit from the flexibility now to move clients between affiliated firms without the necessity of additional paperwork,” she said.
She also noted that Andrew J. Kriegler, IIROC’s president and chief executive officer (CEO), who will be the New SRO’s CEO on Jan. 1, just spoke at Worldsource’s western conference last week.
“He did commit to making it a fair playing field for all advisors,” she shared. “He did say that the New SRO would not force mutual fund advisors to follow the current IIROC rules, which do not allow directed compensation. So, that will remain and that is a huge win if a firm decides to become a dual-registered firm.”
Morfesis said having the New SRO will simplify compliance since there will just be one rulebook, where the various rules are clarified and not just an amalgamation of the two current rule books. She said Kriegler also indicated that he was willing to work with firms as they sort things out.
Clients will also just have to deal with one set of rules and one complaint handling process, which should eradicate some of the current confusion they experience by not knowing which process to follow.
“Moving forward, there’ll be one centralized point of contact for investors,” she said. “That clarity is probably the most important thing from a client perspective.”
While there will be fees to create the amalgamated SRO, she expects those to be a short-term pain point and “within a year or two, the fees will be standardized and there will be cost savings for anyone becoming a dual firm” since right now dual firms, like Worldsource, much pay both MFDA and IIROC fees.
Morfesis expects most firms will eventually become dual since, she said, “the New SRO is making it quite flexible and easy to become a dual firm”.
