The Mutual Fund Dealers Association of Canada plans to intensify its focus on risk, as part of its new strategic plan released Tuesday.
The self-regulatory organization says that in its two previous strategic plans it has focused on raising the standard of regulation among fund dealers. Now, it’s shifting the focus to assessing risk in its compliance and enforcement efforts, in order to do a better job of anticipating emerging risks that will require regulatory intervention.
“Applying a risk-based approach to all of our regulatory processes will allow us to increase the effectiveness of our operational activities,” the plan says.
According to the MFDA’s strategic plan for 2012-2014, the regulator is planning to “explore new methods to increase our ability to identify, monitor and address high risk areas.” It will also change its sales examination cycle to differentiate firms based on risk, so that riskier firms will be examined more frequently.
This plan to focus more intently on risk, also means that more technical issues will receive less attention. Specifically, the MFDA says it plans to streamline the sales examination program “to narrow its focus”, adding that it will address compliance with requirements that have less significant investor protection value “through other means”. It also proposes to expand the use of targeted exams to focus on specific risk areas, and promises to develop tools, education and guidance to help dealers address deficiencies that are uncovered in sales compliance examinations.
In terms of enforcement, the regulator will intensify the focus on risk there too, and plans to focus on issues affecting seniors. The MFDA says it will develop additional procedures to address high risk situations, including expedited processes for handling serious cases and methods of addressing situations of ongoing harm, and it will explore methods to resolve systemic issues at dealers.
Additionally, the SRO says that it will streamline its procedures for gathering information from dealers, and rely more frequently on firms’ internal investigative efforts. The MFDA plans to develop methods to “more efficiently address minor violations”. It is also looking to do more in-depth analysis of data gathered from complaints and through its Member Event Tracking System, and will develop a “whistleblower” policy.
The other focus of the new strategic plan is improving communication. The MFDA says that it plans to further improve consultation with the industry when developing policy, including posting draft member regulation notices for comment, preparing discussion papers for the MFDA Policy Advisory Committee before proposing specific rule amendments to solicit alternatives for addressing regulatory concerns, and distributing copies of draft rules to dealers at its member regulation forums.
It also aims to provide more assistance to dealers, and improve its dealer education efforts. “Our objective is to create more opportunities for open dialogue and discussion with members, increase member awareness of the resources that are available to them from the MFDA and generally improve member confidence in contacting the MFDA for assistance,” it says.
Similarly, the MFDA says that it will develop a plan to enhance collaboration with investors, including adopting a formal process to obtain input from investor groups on MFDA policy initiatives, and enhancing communications to provide investors with more meaningful information and educational resources. It says it will seek opportunities to participate in investor education initiatives of other regulators, and will communicate with dispute resolution services, “to ensure a consistent and harmonized approach to addressing investor complaints.”
What remains to be see is who the MFDA picks to implement this new plan. Last week, its long-time president and CEO, Larry Waite, announced plans to retire at the end of September. A search for his replacement has begun, and it aims to name a new chief in June.