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Mutual fund regulator wants one investment watchdog

The two agencies overseeing Canada's mutual fund and brokerage firms should merge into one single regulator, the chief executive of the Mutual Fund Dealers Association of Canada says.

Larry Waite said that no talks are under way to merge the MFDA with the Investment Industry Regulatory Organization of Canada (IIROC), but that he has grown convinced the idea makes sense, especially now that his mutual fund association has matured more than a decade since its creation.

A merged organization would be better for investors, who are confused by the array of regulators overseeing different aspects of the financial industry, and would be better for the companies being regulated, he said.

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"Does it make sense to merge? I think it does," Mr. Waite said in an interview Wednesday. "My view always has been the fewer regulators the better."

Support for a merger marks a change of heart for Mr. Waite, who rejected overtures to combine with other self-regulatory organizations when an earlier round of consolidation was proposed in 2005.

In 2007, the Investment Dealers Association, which regulated brokerage firms, combined forces with Market Regulation Services Inc., which oversaw trading activity on stock markets, to create IIROC.

The move left Canada with two large national self-regulatory organizations - IIROC and the MFDA - overseeing separate parts of the investment industry.

Mr. Waite said he was unwilling to join the new entity then because the MFDA was still a new organization and needed to get established before it was merged. The MFDA was officially created in 1998 to oversee mutual fund dealers, but spent its early years developing regulations and only began fully operating as a regulator in 2003, he said.

He said he also felt the former IDA needed to get its own house in order and improve its operations - including splitting off its industry trade association arm into a separate organization.

But with those steps taken, he says he now feels it would be easier for the public to deal with a single regulator to try to make it easier for retail investors when they have complaints.

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"Investors are confused - they don't know who's on first."

He also argues many companies regulated by the MFDA would benefit by having a combined regulator.

Of the 139 member firms supervised by the MFDA, 33 are also supervised by IIROC because they have both mutual fund and brokerage operations. They include Canada's largest financial institutions, including the big banks.

Those firms must adhere to different guidelines and need two compliance operations and different computer reporting platforms, Mr. Waite said.

Susan Wolburgh Jenah, CEO of IIROC, said Wednesday she has long believed there would be advantages to merging IIROC and the MFDA, but there are no active talks about the idea.

"I think it's an idea that has tremendous merit," she said in an interview. "I've seen the benefits of the merger we have done, and I'm probably more strong in my view that it would probably be desirable at the end of the day. But it's always a matter of timing."

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Mr. Waite also said political leaders should go even further and consider combining IIROC and the MFDA into a proposed new national securities commission, bringing all securities regulation under one roof.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More

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