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As two investment regulatory organizations grapple with whether to merge or launch a new oversight body from scratch, Canada’s securities regulators have decided they want more public input before making a decision.

On Thursday, the Canadian Securities Administrators (CSA), an umbrella organization for provincial securities commissions, published a consultation paper that reviews the current working structures of both 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.

The paper identifies several key problem areas with having two self-regulatory organizations, or SROs, operate in parallel, including duplicate costs for investment firms that sell both mutual funds and securities, investor confusion, risk of regulatory arbitrage (where firms could find loopholes in certain rules) and inefficient access to certain products such as exchange-traded funds.

Rather than publish its own reform proposal at this time, however, the CSA has opened up a new 120-day window for the public to comment. Written submissions are due by Oct. 23.

“Feedback from all stakeholders is critically important and will be used to identify a proposed policy response and a path forward,” CSA chair Louis Morisset said in a statement.

The CSA’s paper follows two independent proposals released separately by IIROC and the MFDA. Earlier this month, IIROC proposed a merger of the two organizations that would see them operate as a single entity but without changes to their existing regulatory rules, business models or fee structures. Earlier this year, the MFDA released a report recommending building a new organization from scratch.

Both published their proposals after Mr. Morisset announced last December that the CSA would begin a review of the self-regulators. The review was prompted by multiple requests from market participants to re-examine the current structure.

During the review, CSA consulted with both organizations, as well as investor advocacy groups, investor protection funds, groups representing various registrant categories and investment industry associations.

The CSA intends to publish a proposal regarding the SRO regulatory framework following the next round of consultation.

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