Originally published in FAIR: Canadian Foundation for
Advancement of Investor Rights, February 2011.
What has been completely overlooked in all the battling over the
issue of a national securities regulator is how the dealers and
persons who actually distribute and trade in securities on behalf
of retail, corporate and institutional investors are regulated. The
community of investment and mutual fund dealers, and their retail
and institutional advisors, analysts, traders, investment bankers,
etc., are primarily regulated by the Investment Industry Regulatory
Organization of Canada ("IIROC") and the Mutual Fund
Dealers Association ("MFDA").
According to their respective 2010 annual reports, IIROC has 208
member firms employing 28,380 approved persons, and the MFDA has
139 member mutual fund dealers with 73,000 approved persons. Both
are national self-regulatory organizations ("SROs") which
obtain their regulatory jurisdiction in each province by that
province's securities commission. What that means is that each
provincial securities commission enters into a recognition Order or
similar instrument, setting out the terms that allow the SRO to
regulate its members in that particular jurisdiction.
The trenchant analogy is a child with many parents, who
don't live together, who don't particularly get along, and
whose disagreements frequently play out on the field of the
SRO's regulation of its members. These regulatory issues are
sometimes local, but more often what is at stake are issues that
transcend provincial boundaries involving dealers who carry on
business in multiple jurisdictions with head offices located
elsewhere in the country. As such, in many respects the two
national SROs are national in name only, with a constant tension
caused by provincial concerns exacerbated by the conduct of the
provincial securities commissions. SRO rule changes require the
agreement of the Canadian securities administrators, and obtaining
consensus from the provincial commissions means that change is
slow, politically motivated and inefficient.
My advice to all the naysayers to a national securities
regulator – live in this world for a while, experience
the frustrations and prejudices affecting proper regulatory
oversight of our capital markets and the dealers, advisors and
market participants caused by regulatory dysfunction, and then you
will likely see the light now clouded by parochialism and petty
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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