It’s rare to hear an industry call for tougher rules for itself, but that’s just what the new chairwoman of the Investment Funds Institute of Canada, Brenda Vince, did in a speech today — suggesting that beefed up regulation of mutual fund managers may be the right way to deal with recent industry problems.

Speaking at its annual conference in Toronto today, Vince said, “We should ask ourselves if a better and more effective answer to the issues that have surfaced in the last few months lies in increased manager regulation, including higher capital requirements.”

In the past few months, a couple of fund managers have been accused of diverting money from their funds. Although these allegations have yet to be proven, coming on the heels of the market timing cases, these claims represent a new worry for the industry and investors.

Vince noted that these cases have led to calls for a contingency fund for managers. “While this might seem to be an easy answer, my own view is that this may be more of a band-aid than a solution,” she said. “I offer this view, not as an RBC executive, but as a former auditor with a fair understanding of what prevents bad things from happening. And I can tell you from that perspective, personal liability and capital-at-risk can serve as considerable deterrents.”

Vince reminded attendees that the Canadian Securities Administrators’ initial efforts at reforming industry regulation identified three important components: manager regulation; fund governance; and a revised point of sale regime.

Since then, fund governance has received the most attention, and, she suggested, “has borne the brunt of some less than constructive criticism because certain issues that were more appropriately focused on manager regulation or point of sale reform got bundled into the debate.”

She noted that she’s personally pleased to see that the current CSA Registration Reform Project, better known as the Fair Dealing Model, “will again elevate the discussion of manager regulation”.

As for fund governance, Vince stressed that, “even the best governance provisions can fail if a manager is unethical or if internal compliance processes are not sufficiently rigorous.”

She also called for change at IFIC itself. “We must ask ourselves – as others ask of us – whether we are trying to do too many things for too many different kinds of members,” she said. “As chair, I will encourage an active debate of this issue at IFIC during the next year.”

Vince added that the search for outgoing president and CEO, Tom Hockin, is well underway, and that she’s pleased with the group’s new board of directors.

http://www.ific.ca/pdfmedia/Brenda_Vince_Speech_28Sept2005.pdf