Plan proposes to promote public confidence by establishing new entity, rather than merge existing SROs, over an 18-month timeline
Following up on a previous announcement, the Mutual Fund Dealers Association of Canada (MFDA) has released an implementation roadmap for establishing a new single self-regulatory organization (SRO) for Canada’s investment industry.
“It is time for real change that benefits all stakeholders, and creating a new single SRO capable of regulating all advisory firms in Canada is the best solution,” MFDA President and CEO Mark Gordon said in a statement. “The establishment of a new SRO provides the greatest opportunity for a successful implementation process that will be the least disruptive to industry participants and most expedient to achieve in a timely and cost-effective manner.”
In an 18-page document, the MFDA laid out an 18-month implementation roadmap consisting of four phases – “direct,” “plan,” “design,” and “launch” – with direction and authority transitioning gradually from the CSA to a designated steering committee, and eventually ending with the new SRO board of directors and management.
“The new SRO must be flexible and able to adapt as markets and financial services evolve; it must reflect regulatory and governance best practices; and it must instill confidence in all stakeholders,” the MFDA said.
To support that goal, the document defined a set of guiding principles and objectives, among which were:
- Strengthening SRO accountability and governance;
- Reduction of regulatory burden and complexity including cost reduction, greater efficiency, encouragement of innovation, and flexibility in business models;
- Harmonization and modernization of regulation across Canada; and
- Increasing public confidence and trust in regulation
For there to be public trust and confidence in the new SRO, the MFDA said it has to go beyond just being a merged combination of Canada’s two current self-regulators. Instead, the new organization “must be created with a new culture and new strategic regulatory partnership between the CSA, industry and the public.”
The new SRO’s effectiveness, the MFDA added, will be better ensured by building from the ground up rather than attempting to put together different legacy experiences, cultures, processes, and expectations. At the same time, efforts must be made to retain qualified and experienced staff from current SROs through ongoing dialogue, transparency, and engagement in the course of the new SRO design.
“The overarching objective is to get the change right and, while it must be recognized that perfection is unattainable, strategic focus must guard against unnecessary sacrifices for the sake of expedience,” the MFDA said.
