Treatment of small dealers improving

In particular, CCOs are pleased when a regulator gives small dealers a voice and it isn’t too overbearing. Says a CCO with an IIROC-licensed dealer Manitoba: “The [Manitoba Securities Commission] is good at listening. Doug Brown [the MSC’s director of legal and enforcement] has stepped up on many issues we brought forward.”

And CCOs of firms under the purview of larger provincial regulators, such as the Alberta Securities Commission and the Ontario Securities Commission, also say their regulators are sympathetic to the needs of smaller firms.

In fact, a CCO with a Mutual Fund Dealers Association of Canada-licensed dealer in Ontario says the OSC is easy to work with: “I have no issues with the OSC. As long as you comply [with the rules], they stay out of your way.”

Trying to find a balance between the responsibility to investors and the concerns of small dealers is a challenge faced by all provincial regulators – and one the ASC takes seriously. “We are sensitive to [small dealers’] circumstances every time new rules or requirements are being considered,” says Bill Rice, the ASC’s chairman and CEO. “We were instrumental in implementing the western exemption, in respect to [the registration of] exempt-market dealers, because we did have an appreciation for the role some smaller intermediaries play.”

CCOs also feel better about IIROC’s treatment of small dealers and the SRO’s efforts to boost communications this past year. “It has improved,” says a CCO with an Ontario-based, IIROC-licensed dealer. “[IIROC] does have presentations and events geared toward small dealers.”

That improvement, says Susan Wolburgh Jenah, IIROC’s president and CEO, is in part the result of the SRO’s efforts to start a dialogue with smaller dealers. “We have a lot of small and medium-sized firms that are members of IIROC,” she says. “And it’s really important for us to be thinking about that group in a different way and really understand what would be better and more effective communication.”

IIROC has done this, she says, by reaching out to the Toronto-based Investment Industry Association of Canada to get a better understanding of the dealers’ issues. As well, Warren Funt, IIROC’s vice president for Western Canada, also has reached out to the many small securities dealers in that region.

Despite the improvements in ratings, CCOs still have plenty of complaints. In many cases, they say, IIROC is overburdening small dealers with its bureaucracy.

Still, the biggest problems are with the MFDA, which received the lowest rating in the category, at 4.2. CCOs say the MFDA views compliance as “one size fits all.”

Says an executive with an MFDA-licensed dealer in British Columbia: “The MFDA is making the industry more complex, so small firms need lawyers to do the things it wants. The unintended consequence is that it makes it tougher on small firms.”

But Karen McGuinness, vice president, compliance, with the MFDA, feels that part of the frustration felt by CCOs stems from the frequent shifts in policy. In recent years, the MFDA has made several changes to its requirements, so CCOs constantly have to relearn rules. McGuinness says the requirements are more stable now and the MFDA is taking steps to help dealers.

“What we’re trying to do is provide more guidance and tools in terms of meeting new requirements,” she says. “We’re now focused on assisting and supporting dealers in achieving minimum compliance.”

© 2012 Investment Executive. All rights reserved.