Policy debates may be intriguing, but enforcement is what matters in investor protection.

Over the past several years, securities regulators have been deliberating over some fundamental policy reforms that could usher in major changes to the rules that govern the retail investment business. Yet, whatever the rules of the road, the regulators’ willingness to utilize their enforcement powers ultimately will determine how the industry conducts itself – and how investors are treated.

Consider, for example, the mutual fund sales practices rule, which was developed in the late 1990s amid growing concern about the industry’s reliance on payola to drive fund sales. At that time, fund firms were openly supplying the winners of sales contests with lavish gifts and trips.

Eventually, regulators adopted rules to stamp out these practices and, in response, firms changed their ways to a large extent. Recently, though, regulators have begun discovering violations of the sales rule.

In the past year, both the Ontario Securities Commission and the Mutual Fund Dealers Association of Canada have brought enforcement actions against firms breaching the mutual fund sales rule.

The regulators’ willingness to bring forth these cases resonates far beyond the firms that face disciplinary action. Invariably, if one firm is violating the rules, there are others doing it, too. And still others must decide whether they need to break various rules in order to compete.

Although rules leave room for interpretation, enforcement action provides certainty. Moreover, enforcement supports the principle underlying investor protection: an overarching obligation to treat clients fairly and honestly.

Ultimately, the letter of the law matters less than the spirit. So, whichever direction regulatory policy takes, enforcement must not waver.