As part of its effort to reform regulation, the Investment Dealers Association of Canada is planning to sell its educational arm, the Canadian Securities Institute, and suggests that it will entertain governance reform of its own.
Outgoing IDA chairman Brian Porter announced the plan at the organization’s annual meeting in Banff Monday. At the same time, IDA president and CEO Joe Oliver called for consolidation of the industry’s self-regulatory organizations and for the IDA to take on prudential regulation as well as consolidation of the ombuds-services. Oliver also unveiled an IDA-funded task force to study how to modernize regulation. In his outgoing address to the board, Porter conceded: “So far we have failed to make headway on large-scale reform.”
He suggests that the IDA has been a constructive force for debate, that it has taken steps to strengthen and improve self-regulation by focusing on risk-based compliance, encouraged industry involvement in rule-making and movied toward more reliance on regulatory principles rather rules. “We will continue to engage in the process of reform,” he says, noting that, on this count, it has “put in place the processes to sell the Canadian Securities Institute. The sale of CSI and transfer of education to third-party providers will enable us to focus more tightly on our self-regulatory mandate.
“The IDA is committed to ensuring that our proficiency standards continue to be met with excellence and so we will make sure that any buyer or strategic partner shares that ability and commitment,” he says. “Also, that means maintaining a close working relationship with CSI.”
This is not the first industry organization to sell off its educational arm. Notably, in January 2004, Thomson Corp. acquired the Institute of Canadian Bankers for an undisclosed sum.
“But, we must do more. We cannot just sit and watch a traffic jam in progress,” Porter adds. “We must take our self-regulatory mandate and be pro-active with it. Incremental improvements to self-regulation do not go far enough. We must recognize that the bar has been raised, and raised significantly. The intensive competitive pressures in our business require the most efficient and cost-effective regulatory structure possible.”
Governments and provincial regulators are demanding a higher standard of integrity, he says, and this reflects the demands the investing public for more transparent, responsive and vigorous regulation of the capital markets. “Satisfying that demand is crucial: our very existence depends on it,” he says. “Our world has changed, as our conference has aptly demonstrated. Our clients demand a higher quality of business product and service, and a higher standard of business conduct. We need to think where we want to be five years from now — not just tomorrow. There may be debate about exactly how to get there. But one thing is clear: we will not get there by standing still.”
He suggests that the industry needs to embrace “bold, dynamic, visionary change.” To that end, he reiterated Oliver’s call for a single SRO. “The consolidation of these three independent self-regulatory bodies [IDA, Mutual Fund Dealers Association and Market Regulation Services Inc.] can improve the efficiencies and coordination of the self-regulatory process, raise the overall standard of professionalism and achieve greater uniformity and significantly reduce costs. A single self-regulatory body will also simplify CIPF coverage to protect investors from firm bankruptcy. A single point of regulatory contact also makes life easier for investors.”
The other regulators have suggested that before a merger takes place, the IDA must deal with splitting off its trade association function and improving governance, among other things. “We need to take a look at each objection to merger and examine it on its merits,” Porter says. “The public directors of these SROs have an obligation to the public interest to ask these questions and promote discussion and dialogue on amalgamation.”
This is not a one-way street, he adds: “My colleagues and I on the IDA board have a corresponding obligation. We must examine our governance procedures and structure in the context of this discussion.”
He warns that self-regulation itself could be in jeopardy. “Self-regulation is never a certainty nor is it a right. The failures that led to the ultimate rejection of self-regulation in Britain illustrate its vulnerability,” he warns. “We must work hard every day to justify our existence and demonstrate that self-regulation is the most efficient form of regulation, which promotes the highest standard of ethics and business conduct in the marketplace.
@page_break@“There may have been a time when we could afford to be complacent. But this surely isn’t it,” he says. “The landscape is moving at full speed. We can make sure that our self-regulation model meets the needs of the world in which we compete. We can do what we do well, and what we have done in the past — bring self-regulation in line with a changing world.”
IDA puts education arm on the selling block
Sale of Canadian Securities Insitute will allow tighter focus on SRO mandate
- By: James Langton
- June 28, 2005 June 28, 2005
- 07:40