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Amid calls for a merger of the two self-regulatory organizations that oversee Canada’s investment advisory industry, the country’s provincial securities commissions announced Wednesday that they are reviewing the “regulatory framework” that governs them.

The policy rationales for the Investment Industry Regulatory Organization of Canada (IIROC), the member-funded group that oversees investment dealers across Canada, and the Mutual Fund Dealers Association of Canada (MFDA), the industry group that oversees mutual fund distributors, will be re-examined as part of the review, the Canadian Securities Administrators (CSA) announced Wednesday.

“In response to requests formulated by market participants, we believe it is appropriate to revisit the current structure and seek comment from stakeholders,” Louis Morisset, the chair of the CSA, the umbrella organization of Canada’s provincial and territorial securities commissions, said in a statement.

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Critics have highlighted many of the overlapping duties of both organizations, which were created at a time when there were clearer lines between mutual fund dealers and other investment advisers. In a recent paper published by the C.D. Howe Institute and an accompanying Globe and Mail column, one of the think tank’s senior fellows argued that the time was “ripe for a merger.”

Joanne De Laurentiis, the former president and chief executive of the Investment Funds Institute of Canada, pointed out that only one-third of annual mutual fund sales are now made through MFDA members, while the rest “are going through IIROC.”

In separate statements, both organizations said they welcomed the review by the CSA.

“We look forward to participating in the CSA’s consultation and in exploring options that make sense in today’s environment,” IIROC said in an e-mail release.

MFDA president and CEO Mark Gordon said in a statement: “This is a very important initiative for Canadian investors, industry and regulators.”

IIROC oversees more than 170 investment firms and is recognized by all 13 provinces and territories, while the MFDA, which oversees about 90 member companies, is recognized by eight provinces. The CSA said it expects to publish a consultation paper by mid-2020.

Ermanno Pascutto, the executive director of FAIR Canada, an investor advocacy organization, said FAIR applauded the announcement, but said the review needed to be a thorough analysis of the effectiveness of having industry regulate itself.

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“I think it has to be a wholesale review,” he said, adding that any self-regulatory organization, or SRO, finds itself in a conflict of interest by having to regulate its own members. "The question is, are the SROs really acting in the public interest? Or really is the financial industry’s interest being served by having an SRO system?”

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