The role of self regulation in the Canadian financial system needs to be reconsidered, and key issues with the industry’s self-regulatory organizations must be addressed, a panel of regulatory experts said on Wednesday.
Speaking at the Investment Counsel Association of Canada’s annual conference in Toronto, Edward Waitzer, a senior partner at Stikeman Elliott and former chair of the Ontario Securities Commission, said self regulation plays an extremely important role in the Canadian securities industry. But he said there are many problems with the way self regulation functions in the industry.
“I think it’s been on life support,” he said.
He noted such examples as the lengthy periods of time it takes for SROs to get rules approved by the Canadian Securities Administrators, the fact that the CSA commonly intervenes in enforcement proceedings brought by the SROs, and the uncertain governance process at the Mutual Fund Dealers Association.
Such issues prevent SROs from functioning effectively and responding efficiently to industry concerns, Waitzer said.
“It kind of defeats the purpose of self-regulation,” he said.
Waitzer called on the industry to address the issues with self regulation proactively. If the problems are left unresolved, he said the role of SROs in the industry could begin to deteriorate.
He noted that the current efforts to develop a single securities regulator present an ideal opportunity to re-establish the role for self regulation in the industry.
Doug Hyndman, chair and CEO of the Canadian Securities Transition Office, which has been appointed by the government to lead and manage the transition to a single Canadian securities regulator, agreed that the role of self-regulation needs to be reconsidered. But he said the mandate of the transition office is already too large in scope to include regulatory reforms to the self-regulatory aspect of the industry.
Rather, Hyndman said self-regulation should be one of the first policy issues that the proposed national body, the Canadian Securities Regulators, addresses once it is established. All aspects of self regulation should be reviewed, he said, from the overall structure and role of SROs, to more minor concerns such as the lengthy process of having rules approved.
Anita Anand, an associate professor in the University of Toronto’s Faculty of Law, said the problems surrounding self regulation are an extension of the broader issues of fragmentation of regulation in the Canadian securities markets.
“Built into our current securities regulatory structure, by definition, is a very fragmented methodology of going about the regulation of our SROs,” said Anand.
She said the industry needs to assess, in particular, oversight of the SROs and whether the current system of oversight works effectively.
Progress on a single securities regulator
Speaking on the activities currently underway by the Canadian Securities Transition Office, Hyndman said the team is currently focused on developing a new Canadian Securities Act. The office will aim to present a Draft Securities Act to Parliament in March 2010.
The office is also developing a transition plan for the new securities regulator, which is set to be complete by July 2010.
Hyndman said he is encouraged that seven provinces and three territories have signed on to the advisory committee that is working with the transition office, even though he said their participation does not necessarily imply their support for a national regulator.
“Even that is a big step,” he said.
Hyndman is optimistic that a national securities regulator could become a reality in the next few years.
“I think there is good support. This initiative has a great deal more momentum than it has ever had before,” he said. “I’m certainly focused on success.”
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ICAC conference report: Panel outlines problems facing SROs
Financial services industry must address the issues with self regulation proactively, Waitzer says
- By: Megan Harman
- November 18, 2009 November 18, 2009
- 15:50