The Ontario Securities Commission’s second attempt at an investor advisory panel now has a year under its belt and, unlike the first go-round, there already is something to show for the effort.

In September 2010, the OSC’s new IAP held its first meeting. At the time, the IAP had potential, but it also faced the legacy of the OSC’s previous, failed attempt. Several years earlier, the OSC had struck an investor advi-sory committee, only to see it fade away once its initial term expired, with seemingly nothing achieved. The new IAP was founded under similar circumstances, having been introduced by an outgoing OSC chairman and left in the lap of the new chairman.

Yet, the results have been notably different so far this time around. Although the work of the first investor advisory committee had not been made public — and the committee sank, seemingly without a trace — the IAP has produced four substantive comments on regulatory policy initiatives during its first year. Furthermore, the IAP is preparing to release its first annual report in the next few weeks.

The comment letters the IAP has produced — they address a wide variety of issues, ranging from proposed new rules for credit-rating agencies to a concept paper on over-the-counter derivatives regulation and comment on an OSC initiative to tackle shareholder democracy issues — appear to have gained some traction with regulators.

But the IAP’s most important contribution to date probably has been its submission on the OSC’s latest statement of priorities, the document that is supposed to set the regulator’s policy-making agenda for the coming year.

The IAP’s comment on the initial version of the OSC’s agenda takes aim at several high-priority issues for investors: whether a fiduciary duty should apply to financial advisors, investor demands for improved access to restitution and a call for better point-of-sale disclosure — all of which were taken up by the OSC in the final version of its annual agenda.

Getting these issues on the OSC’s radar is an achievement. What remains to be seen is whether these promises — particularly the pledge to study a statutory fiduciary duty and to explore a mechanism for providing investor compensation in cases in which securities laws are violated — translate into action.

The one area in which the OSC is already moving ahead on an existing initiative is POS disclosure. And indications are that future versions of the POS project will address some of the concerns that the IAP and others have made in their comments on the subject. For example, regulators are working on extending the proposed new format for up-front disclosure to cover all investment funds, not just mutual funds; and the regulator also has indicated that the disclosure requirements themselves are likely to be revised in response to complaints about the sort of risk disclosure required and their lack of benchmarking.

The new IAP has made its mark on the regulatory landscape already. “I think we’ve had a very successful year,” says Anita Anand, chairwoman of the IAP and associate professor in the University of Toronto’s faculty of law.

Anand points out that the IAP was really starting from scratch. At this time last year, it had a mandate from the OSC and little else. Along the way, the IAP has had to devise a process for choosing issues to tackle, researching those subjects and crafting its submissions. “I think we’ve been prolific,” she says, “in getting the job done.”

Looking ahead, Anand says, the IAP wants to do more to engage investors and gather their input and support for its submissions to ensure that the panel’s work is reflecting the views of investors: “We want to work on the back end of the submissions now.”

In the upcoming year, the IAP will be doing more to reach out to investors, Anand says: “We want to hear, first-hand, what it is that they are concerned about. We think that reaching out to inves-tors, including investors outside of the [Greater Toronto Area], is important in enabling us to be more informed; not just hearing from experts. We want to hear from the investors themselves.”

Just how the IAP will go about the tricky task of taking the pulse of a vast, heterogeneous group such as retail investors is still up in the air. Anand says the IAP has been discussing its options, such as focus groups, surveys and town hall meetings.

The IAP did use a series of focus groups to inform the panel’s submission on the OSC’s statement of priorities, which, Anand says, resulted unquestionably in a better submission. But how the IAP will ramp up its investor outreach has yet to be determined.

In the meantime, investors can certainly count the IAP’s first year as a success. The panel already has surpassed the achievements of its predecessor, although that wasn’t exactly a high bar to clear. Yet, if there’s a criticism to be levelled at the IAP, it’s that although it certainly has produced high-quality submissions, the quantity could be higher, too.

There were numerous regulatory initiatives unveiled during the past year that could have a significant impact on retail investors on which the IAP did not weigh in. For example, the panel didn’t comment on any of the regulatory initiatives dealing with market structure, such as the treatment of dark pools and dark orders, or on the proposed new rules governing electronic trading and direct-market access.@page_break@The IAP also didn’t address the proposed new regulatory framework for securitized products and new rules for the exempt market, which are designed to protect retail investors regarding these complex products.

And the IAP did not weigh in on the proposed merger of London Stock Exchange Group PLC and TMX Group Inc. , or on other planned developments in the fast-changing, multi-marketplace environment.

Although something like a public consultation on a proposed exchange merger may not fall strictly within the IAP’s mandate, this kind of fundamental market event seems to cry out for a well-researched, well-reasoned retail investor perspective.

Other things that are clearly beyond the IAP’s mandate, such as rule proposals by the self-regulatory organizations or the recent consultations initiated by the Ombudsman for Banking Services and Investments, also could benefit from more investor input.

By comparison, the Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada), which had something to say on most of these key investor issues over the past year, produced 21 submissions to various consultations over the past year. Of course, FAIR Canada is a different animal from the IAP in that it has a broader mandate, several full-time staffers and greater resources than the IAP (which has an annual budget of just $50,000 for research assistance, along with some administrative support from the OSC).

Still, the IAP is just in its infancy. The panel’s original mandate calls for members to serve a two-year term, with the chairman of the OSC having the option to grant them a second term. Whether the IAP gets renewed beyond its first term will be the big question for the year ahead.

So far, the OSC seems pleased with the IAP’s work. “In its first year,” says OSC chairman Howard Wetston, “the IAP has been very active and has provided invaluable feedback regarding investor concerns and our policy-making process. We have a number of investor initiatives underway, and look forward to further engagement with investors through the IAP.”

However, the prospect of being usurped by a national regulator also hangs over both the OSC and the IAP. Indeed, if the Supreme Court of Canada gives the federal government the go-ahead to claim jurisdiction and establish a national regulator, the current transition plan calls for the creation of an IAP at the new authority that would be charged with representing the interests of investors on the regulator’s rules, policies and practices.

It’s not clear how closely that panel would follow the path set so far by the OSC’s IAP. Says Doug Hyndman, chairman of the Canadian Securities Transition Office: “We are watching the OSC investor advisory panel with interest and hope that it will provide a good foundation on which the [proposed Canadian securities regulatory authority] can build.”

However, the transition plan already envisions something a bit different from the OSC’s IAP, indicating that the proposed national securities regulator’s panel would be required to appear in front of the new regulator’s high-level policy-making group at least three times a year to discuss policy issues; and the chief regulator would be required to respond to that panel’s written recommendations in writing.

Moreover, the CSTO has been looking beyond the OSC’s IAP for inspiration. This past spring, the CSTO hosted a consultation, along with FAIR Canada, that included the chairman of Britain’s financial services consumer panel and representatives from the U.S. Securities and Exchange Commission and its investor advisory committee, in an effort to get some insight into their experiences with investor consultation.

If the proposed national securities regulator follows these examples, Canadian investors will get a more powerful voice. Britain’s panel for example, is a much bigger undertaking than the OSC’s IAP, having spent £865,000 (about $1.35 million) in its latest fiscal year, and boasting a much broader mandate than its Canadian counterpart. In addition to responding to proposed regulatory initiatives, Britain’s panel also reviews and reports on the regulator’s performance; can advise the government on financial regulation; and is empowered to speak out publicly when it disagrees with the regulator or wants to draw attention to a particular issue.

Hyndman says the CSTO is working on recommendations for the composition and mandate of a national advisory panel but hasn’t yet decided exactly what it will recommend. If and when a national securities regulator is established, those recommendations would then go to its board for consideration.

For now, Canadian investors can take some comfort in the fact that regulators do seem committed to ensuring investors have a greater voice. Says Hyndman: “We see the OSC’s IAP, and the proposed [national] IAP, as a valuable initiative that will be one of a number of ways to get input from investors to help inform regulation.” IE