Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Ken Kivenko is an investor advocate, chair of the advisory committee of the Small Investor Protection Association and president of Kenmar Associates

The current pandemic has shown that when pressed, government can indeed be bold and act quickly to protect Canadians. We have seen significant social safety-net programs implemented by federal and provincial governments at breakneck speed and the Canadian Securities Administrators (CSA) have also moved quickly to grant emergency regulatory exemptions and relief to the companies they regulate.

Such responsive action by the CSA is to be lauded, but this leads me to ask: Where is the swift and decisive action in the name of investor protection and the public interest?

Story continues below advertisement

I would suggest one important area where the CSA can focus their newly found regulatory agility and determination is on their coming review of Canada’s self-regulatory organizations (SROs). This review is highly relevant for the future of investor protection and should be keenly watched by Canadians from Bay Street to Main Street.

Why is this review so important? Public trust and confidence is the bedrock of every effective regulatory system. In Canada, regulation of most investment advisers is not directly performed by the CSA, but rather by two industry-funded SROs – the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC). While both are charged with protecting retail investors, the SROs have inherent conflicts between the interests of investors and the interests of their members.

After years of putting up with the fox guarding the hen house, the level of public trust and confidence in the SROs has been severely eroded. If the CSA wants to continue to rely on SROs to help them fulfill their public interest mandate to protect Canadian investors and promote confidence in Canada’s capital markets, they need to recognize that their review of the SRO framework is of enormous consequence to both of these objectives – and they need to get it right.

IIROC is proposing a quick fix and believes that this can be achieved through a simple merger of the two existing SROs, citing purported regulatory efficiencies and cost savings. Here is the problem – it is doubtful whether any such efficiencies or cost savings would benefit anyone other than the industry itself, and most importantly, it does nothing to restore public confidence and trust in the SROs and remedy the conflicts concerns. A merger does nothing in the public interest other than provide the appearance of taking some action with respect to SROs.

Trying to merge existing entities with existing cultures and processes is not the way forward. For meaningful change, change that is innovative and bold, a clean slate is needed to develop global best practices and world-class investor protection. The CSA must fully embrace this unique opportunity with a view toward real and enduring reform through a strategic analysis of the future SRO structure in Canada. The goal must be a system that is truly in the best interest of the investing public and not just the industry. What Canada needs is a modern and effective SRO that is in keeping with international regulatory best practices.

To achieve this goal we need a fresh approach to SROs, and no ideas should be off the table. Back in February the MFDA released a Special Report on Securities Industry Self-Regulation, which contains new ideas and perspectives for what a true public interest SRO could look like for Canada. In its report, the MFDA proposes abolishing itself and IIROC and creating a new SRO that, among other things, begins to address the issues of conflicts and lack of public confidence and trust in SROs through a new SRO governance structure. This new structure would continue to include industry, but would also include investors and representatives of the CSA. This makes a lot of sense. Investors and representatives from the CSA need a meaningful seat at the SRO governance table.

Leadership, vision, strategic thinking and resolve. The CSA needs to demonstrate all four of these traits if the results of their SRO review are to be investor-focused and in the interest of the public. I was heartened to see this type of leadership on full display at an OSC conference I attended a few years ago where the clear message from the OSC executive was that leadership means doing the right things. In the context of the SRO review that means standing up to the predictable resistance from the wealth-management industry to new approaches that are truly investor-focused. The coming SRO review is a defining moment for the CSA to redeem itself and display true leadership, informed by a clearly articulated vision that is backed up by a determined resolve to achieve a modernized SRO framework that truly benefits Canadian investors.

Story continues below advertisement

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies