SROs stand out in soliciting industry comments

“IIROC isn’t just following its legal requirements to seek comment,” says an executive with an Ontario-based investment dealer. “The roundtables are good, and IIROC has its policy people and its senior people attending. [The process] feels more consultative in person, and it’s good to see what other people on the Street are thinking [about the proposed new rules].”

The survey invoked similar positive comments about the MFDA’s forums, but that SRO also was praised for seeking input from a broad range of sources – not only across regions, but from mutual fund dealers of all sizes as well. A CO with a small mutual fund dealer in the Prairies said the MFDA “is reaching out a lot more to dealers like ours” when soliciting comment on new rules.

In fact, Mark Gordon, president and CEO of the MFDA, says, the SRO’s “policy advisory committee is one of the key instruments in getting feedback.” Noting that the committee consists of “a cross-section of our members across the country,” he adds that the MFDA’s “current membership [for the committee] is about 15-plus [firms]. So, more than 10% of our total membership sits on this committee.”

As a result, the MFDA has seen its ratings improve significantly in this category since the inception of the Report Card in 2009, when the SRO received a mark of 5.1. As an executive with a mutual fund dealer says, “Right now, the MFDA is operating effectively. It’s been an evolution over the past 15 years – but [finally is] starting to understand the business.”

Meanwhile, the provincial regulators in the Report Card all received lower ratings when compared with the SROs. However, much like the SROs, these ratings were tied to in-person consultation.

For example, the Ontario Securities Commission (OSC) received the highest rating among the provincial regulators, at 6.5, because “it’s making an effort with its committees and outreach programs,” says a CO with an Ontario-based exempt-market dealer (EMD). “I’m part of an industry group, and the OSC is very interested in hearing what we think. And on one or two occasions, OSC staff have even been fairly receptive to our ideas.”

In contrast, the B.C. Securities Commission (BCSC), which received the highest rating in this category in 2013 (at 7.6), has seen its score drop precipitously over the past two years to 5.7 this year.

As a CO of a British Columbia-based investment dealer says, the BCSC “made the decision to eliminate advisory councils a few years ago, so there’s less opportunity for us to engage or to give input now. Yes, [the councils] were dysfunctional, but [the BCSC] hasn’t set up anything to replace them.”

However, Sandy Jakab, director of capital markets regulation with the BCSC, says the regulator “noticed that the several times we would bring up highly specialized topics to those committees, there would be half to three-quarters of committee members sitting around with nothing to contribute because they didn’t happen to have experience in those particular areas.”

Thus, Jakab says, the BCSC made the decision a few years ago to invite comments on an issue-by-issue basis – sometimes from carefully targeted groups; sometimes from larger industry associations.

Still, the ratings that the regulators received in this category – whether high or low – reveal only part of the story. That’s because several survey participants specified that they were interpreting the question narrowly. As a CO with a mutual fund dealer in Ontario put it: “Soliciting is one thing; acting on that information is another. I’m giving the [MFDA] an 8.0 for soliciting.”

One of the concerns that COs and company executives had about this process is whether their comments are sought early enough to have any impact.

“[Regulators] should involve the industry earlier, before task forces and such are set up,” says a CO with an Alberta-based EMD. “I’d like to see [regulators] engage with us in advance, before the momentum builds up and the direction and destination are already set.”

Adds the CO of an IIROC-licensed firm in Ontario: “I’d like to see a more consultative approach before the comment stage. Everything is already baked in by that point. The decisions have already been made.”

In turn, regulators say, the formal consultation process does indeed lead to changes in proposed policies. In fact, Gordon says, some MFDA members may not be aware of how far their input actually goes.

“When we do issue something for public comment,” Gordon says, “virtually all of the policies and bylaws that we ultimately publish have all been amended, in part, as a direct result of that public comment process.”

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