President & CEO of newly amalgamated regulator outlines accomplishments since January and offers insights into what the future holds for firms & advisors
Andrew Kriegler has had a busy year. The inaugural President & CEO of the Canadian Investment Regulatory Organization (CIRO) has overseen the ongoing integration of the MFDA with IIROC to form CIRO. Within that effort, his team has rolled out new options and offerings to firms, integrated internal processes, and worked to deliver something that investors and advisors have been seeking for years: flexibility.
In a wide-ranging interview with WP Kriegler explained what CIRO has done in the past year to create greater flexibility for the industry. He covered dual registrations, internal efforts within the regulatory, why they’ve increased fees for some firms, and what has motivated this shift towards a single regulator.
“Real structural change in a regulatory system doesn’t happen very often, and there’s good reason for that,” Kriegler says. “But it means there’s a lot to do, and I think giving flexibility to Canadians is something we could have moved on earlier. I’m glad we moved when we did. We’ve got a lot of work to do and we’re going to do it.”
What has CIRO done so far?
A great deal of that work, so far, has been internal to CIRO. Integrating two large regulators with their own policies, procedures, and corporate cultures has been a challenge. At the high level, operational areas of the organization have been brought under single leadership. Those areas can continue to deliver regulation based on existing rules while the new harmonized rulebook is written and rolled out. Kriegler believes CIRO will be releasing elements of the new framework in the “near future” with a regular cadence of rule releases coming in the following months.
Member compliance teams are being integrated, too, with an eye to both rules and interpretation. IIROC and the MFDA had similarly written rules covering similar topics. However, each regulator’s interpretation of those rules could vary significantly. CIRO has a dedicated ‘integration hub’ designed to sort through compliance-related issues emerging from this integration.
Dual registration is a key part of CIRO’s work to give Canadian investors greater flexibility. Firms now have the ability to register with both IIROC and the MFDA, where before they would have to establish separate legal entities for each registration. Kriegler believes that a dual-registered firm can more seamlessly help clients through various stages of life as complexity increases.
Since rolling out dual registration in January, three firms have completed the process — with around 6 more “in the pipeline.” Kriegler accepts that this doesn’t look like many but notes that changes of this nature are usually slow to be decided on by corporate entities. He believes that the industry is in an early stage of adoption and dual registration numbers should spike in coming years.
Why is CIRO raising fees?
In its first annual report, CIRO projected a 9% increase in expenses next year. The regulator expects to spend $149.6 million in fiscal 2024, with revenues of $147 million — up from $141.3 million this fiscal year.
That increase in revenue will largely be driven by fee increases. CIRO projects a regulatory fee increase of 5.2% year over year. Fees from equity market regulation will rise 10% and debt market regulation fees will increase by 4%.
Investment dealers will see their fees rise by 6.4% while mutual fund dealer fees will remain flat. Kriegler explained that the MFDA saw a significant increase in fees last year, while IIROC was more modest. These increases reflect something of a rebalance.
The cost of integration and the work outlined above is a key driver of these fee increases. CIRO will also be running at a deficit in fiscal 2024, which Kriegler explained is part of their strategy to spread high upfront integration costs over the next three to five years for members. He believes that these fee increases do represent value for the industry long-term.
“We need to make an investment in our regulatory framework to allow Canadians to be served better,” Kriegler says. “If we don’t do that, it would be the living embodiment of the phrase ‘penny wise, pound foolish.’ If we save a few extra bucks here and limit the ability of firms to organize themselves efficiently, the cost to the system will be far greater.”
What can advisors expect from CIRO going forward?
Kriegler identified a desire at the regulator to deliver value for both investors and advisors. He noted that while most interactions are at the firm level, advisors will start to see improvements in the areas of continuing education and proficiency. His goal, at the end of this amalgamation process, is a “single, consistent, flexible proficiency regime.”
That work will build on an ongoing process at IIROC to reshape proficiency regulation. He notes there is a proposed move to an exam model, away from the current course model. There are also new competency profiles that have been built for various registered categories.
Having integrated those ongoing changes at IIROC with the MFDA, Kriegler notes there is now a push towards aligning and harmonizing continuing education requirements across both registrations. The tricky part will be in creating a more consistent streamlined educational process that still meets the unique needs of MFDA or IIROC registered advisors.
Perhaps the biggest future goal Kriegler sees for CIRO among ordinary advisors is reflected in the work they’re doing in Quebec. While IIROC had registration responsibilities in most of Canada, the MFDA did not. Now the Autorité des marchés financiers (AMF) has proposed that CIRO take over registration responsibilities for MFDA advisors in Quebec. Kriegler hopes that, if this work goes well, CIRO will become more of that “one stop shop” for advisors across the country, handling proficiency, continuing ed, and registration.
Regulatory change rarely happens quickly, if it happens at all, but CIRO has embarked on a period of significant and structural change. As they come to the end of their first year in this process, Kriegler’s core message is one of patience in pursuit of a core goal.
“Like very other organization there are more things we’d love to be able to accomplish that we probably can’t I the near term or over any fixed horizon,” Kriegler says. “So we’re going to have to think hard working with the industry and with other stakeholders like our investor advisory panel to figure out what we do first and in what order.”
