Merger of Canadian Securities Regulators Heads to Final Stages with New Board of Directors

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The merger of two self-regulatory bodies that oversee the Canadian investment industry is heading towards the final stages of approval, with regulators announcing the final framework and a new board of directors.

The Canadian Securities Administrators (CSA), an umbrella organization for provincial and territorial securities commissions, released the names of proposed members of the new self-regulatory body’s board of directors on Thursday. It will combine the functions of the Investment Industry Regulatory Organization of Canada (IIROC), which oversees investment dealers, and the Mutual Fund Dealers Association of Canada (MFDA), which oversees 90 mutual fund dealers .

The CSA also revealed the names of the board members of a new single investor protection fund for the industry and released for public comment several documents outlining the structure of the new organization and fund.

“Today’s announcement of the new guidance and the release of the draft documents mark an important step towards our goal of creating a new [self-regulatory organization] and [investor protection fund] that serves a clear public interest mandate, better protects investors and promotes public trust,” CSA Chairman and Autorité des marchés financiers CEO Louis Morisset said in a statement.

The public comment period, which is open until June 27, is one of the final steps in the consolidation of IIROC and the MFDA, as well as the creation of an investor protection fund by combining two existing funds – the Canadian Investor Protection Fund (CIPF) and the MFDA Investor Protection Corporation. The fund will be independent of the new organization.

The two self-regulatory bodies have long been criticized by investor advocates and the investment industry for overlapping areas of oversight, as more wealth managers serve clients who buy both funds mutual funds and individual securities. In 2019, the CSA began to review the “regulatory framework” governing both IIROC and MFDA and, after industry consultations and several proposals, a new self-regulatory organization plan was formed.

The organization which has not yet been named should be in place by January 1, 2023.

The proposed organization will have a different governance structure than IIROC and the MFDA, with greater accountability to the CSA and a more diverse board. It will initially include the registration categories of investment dealers and mutual fund dealers as well as market members.

The possibility of incorporating other categories of registration – such as exempt market dealers and portfolio managers currently supervised directly by CSA members – will be considered in a separate phase.

The proposed framework plans to eliminate redundant costs and minimize regulatory inefficiencies; promote access to advice for all investors; reduce investor confusion; streamlining the complaints process; strengthen controls and improve the transparency of enforcement mechanisms; and strengthening market surveillance, among other measures.

The proposed board of directors for the new self-regulatory organization will consist of 14 members, with a majority of independent directors, including new chairman Tim Hodgson, a former financial services executive who is currently chairman of Hydro One. The director general of the new organization, who will be the last member of the board of directors, should be appointed in the “coming weeks”, the CSA said in a press release.

The new Investor Protection Fund board will also have 14 members, including new chair Donna Howard, trustee and current chair of CIPF, and vice-chair Dawn Russell, trustee and current chair of MFDA Investor Protection. Corporation. The chief executive of the new fund, who would be the last member of the board, is expected to be appointed in the third quarter of this calendar year.

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