After simplifying regulation for mutual fund dealers, Quebec should focus on harmonizing rules and regulatory framework, says iA Private Wealth CCO
It’s been a month since the Canadian Investment Regulatory Organization (CIRO) announced an expansion in its authority to regulate mutual fund dealing activities in Quebec.
Through a delegation of powers by Quebec and the Autorité des marchés financiers (AMF), CIRO will be empowered to register dealing representatives of mutual fund dealers in the province, as well as conduct compliance examinations for mutual fund dealer firms with activities in Quebec.
In its official statement, Canada’s single self-regulator for investment industry activity described the move as “a new milestone in the harmonization of the regulatory and operational framework across Canada.” And Julie Gallagher, Senior Vice-President and Chief Compliance Officer at iA Private Wealth, couldn’t agree more.
“I was expecting these changes, but I was anticipating them to come a little later,” Gallagher told Wealth Professional. “I'm really pleased that they decided to put some focus on that and make it a priority. And we certainly welcome this as a very positive change for activities in Quebec and beyond.”
Rowing in two regulatory streams
In the past, Gallagher said mutual fund dealer firms in Quebec had to contend with a cumbersome process, as two regulators would come in to conduct examinations. Not only did it take up precious time for the firms as well as advisors at the branches being audited, but it also increased the potential for confusion arising from inconsistent audit results.
“I strongly believe the milestone of achieving harmonization in the regulatory and operational framework in Quebec will be beneficial to us,” she said.
While Gallagher applauds the changes by the AMF and CIRO, she says more should be done to harmonize and simplify the mutual fund regulatory structure. Aside from firms in Quebec having to pay different fees compared to those outside the province, she says there are still other ways in which the rules governing mutual fund advisors differ in Quebec.
“In Quebec, you still have NI 31-103 that is applicable to mutual fund advisors versus the rest of Canada,” she explains. “In addition to that, the Chambre de la sécurité financière (CSF) is still there when it comes to examining the conduct and reviewing accountability of mutual fund advisors.”
Dual registration provides advisor relief
Shortly after the announced delegation of powers to CIRO, iA Private Wealth became one of just a few firms in Canada to be recognized by the single self-regulator for dual registration. With its status as a dually registered dealer confirmed, the firm is now able to address a critical advisor pain point.
Amid the recent trend of advisors switching firms, Gallagher says the registration process has proven to be critical with real operational implications. For breakaway advisors moving from one dealer to another, the possibility of having to re-register instead of simply transferring their registration can be stressful as it introduces more costly delays.
“When there are sharp moves in the market, clients need to be serviced. They want to speak to their advisor, and the advisor wants to be able to serve their clients,” she says. “Because of that delay, it was really hard for them and for us as a firm when we were welcoming new advisors. Depending on the province, the wait could be up to six weeks.
“Now that we're a dual-registered firm with the regulator, it’s possible to have those licenses transmitted to us directly, so there is no blackout period. … And, most importantly, no gap in client service,” Gallagher says.
A long road towards harmonization
Like many others in the industry, Gallagher says the industry must evolve to ensure clients get the services they want as they pursue retirement security and other financial objectives. To achieve that more effectively, she argues, will require a more simplified regulatory framework, with a process that involves one regulator with one set of rules.
“That's really, I think our end goal, our north star, and I believe that the delegation of powers to CIRO is an excellent first step toward achieving that in Quebec,” she says.
CIRO and the AMF will be working on a timeline to implement the delegation of powers in Quebec, with a transition period allowed for mutual fund dealers in the province to make necessary changes to their systems. As the two regulators collaborate on that process, Gallagher argues they have an opportunity to redraft their rules into one rulebook, with the end goal of harmonizing the regulatory framework for Quebec’s mutual fund advisors.
“When you've got to answer to different regulators, the flow of information is broken. And that's not how you do best risk management and ensure investors and markets are protected,” she says. “I think all firms want to have one regulator to go to not only because it's more efficient, but because it's easier to innovate and evolve – with our needs as well as our clients’ needs.”
