The primary advocacy group for Canadian investors is facing extinction after it has returned a $2-million grant, unable to raise matching funds.
The Canadian Foundation for the Advancement of Investor Rights, known as FAIR Canada, has given back money provided in 2012 by Stephen Jarislowsky, the founder of investment firm Jarislowsky Fraser Ltd. Mr. Jarislowsky provided the endowment funding on the condition that FAIR found two-for-one matching money within two years.
FAIR Canada received $2-million from the Ontario Securities Commission as part of the match, but has fallen short since and required multiple extensions on the Jarislowsky deadline. On Friday, the sharp-tongued Mr. Jarislowsky blamed governments and regulators, including self-regulatory industry groups, for failing to step up to what he sees as their responsibility.
"They kept the organization alive but they have not provided adequate support for it to actually realize its potential or be operationally sustainable,” Mr. Jarislowsky said in a statement provided by FAIR. “We do not feel that we should lend out more to an organization to advance a mission that is a governmental and regulator responsibility, which governments and regulators refuse to fulfill,” he said.
FAIR Canada was started in 2008 to provide a voice for individual investors. FAIR Canada said the multitrillion-dollar financial, bank, investment and insurance industries have 16 or more organized lobbying or advocacy groups, all mobilized to influence government and regulators when laws and rules are crafted. FAIR Canada argues ordinary Canadians were virtually unrepresented before FAIR was created, in part because retail investors lack the resources to effectively advance their own interests.
In the past year, FAIR Canada has submitted comments or participated in round tables on mutual-fund sales practices, the client-financial adviser relationship, and a proposed code of conduct for banks selling products to senior citizens.
Mr. Jarislowsky has resigned from FAIR’s board of directors. “I do not believe that I should remain associated with an organization that the securities commission and governments will not support … [it] might be read by the public as an endorsement of the current unsustainable state of FAIR Canada.”
FAIR Canada will return the original $2 million plus about $400,000 in investment earnings that came from the Jarislowksy grant.
FAIR Canada cut expenses sharply in the fiscal year ended June 30, from $772,228 to $545,143, but posted a loss of $114,493, its financial statements show. In the year ended June 30, 2018, FAIR lost $546,413.
The organization can go to the end of 2020 with the current four-person staff by using the OSC grant money to fund operations, says executive director Ermanno Pascutto, the group’s founding CEO who returned in an interim role earlier this year. The group’s board must decide, though, whether it should "hope that something comes out of the blue – or do we cut further?”
Predecessors of the Investment Industry Regulatory Organization of Canada (IIROC) provided the initial funding for FAIR Canada, $3.75-million in 2008.
All told, the self-regulatory IIROC and its predecessors have given FAIR Canada a total of $4.9-million over the years. In the fall of 2018, it gave a $250,000 grant from its restricted fund that comes from fines and settlements.
That fund has roughly $15-million in it, said Mr. Jarislowsky, who argues there’s enough for greater support of FAIR.
IIROC spokesman Paul Howard said the primary purpose of IIROC’s fine and settlement money is to fund the operation of its disciplinary hearings. It has provided more than $6-million to organizations that support investor protection and education and financial literacy. “IIROC’s restricted fund was not established and was never intended to be used for the exclusive benefit of any single organization, no matter how laudable its objectives,” Mr. Howard said.
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