The Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada) is calling on the Canadian Securities Administrators (CSA) to rethink the underlying rationale for self-regulation — and not to simply consider a merger of the existing bodies — when it carries out its planned review of the SRO framework.

Late last year, the CSA announced plans for a review of self-regulation. It promised to issue a consultation paper on the subject in mid-2020.

When that review does take place, the CSA shouldn’t simply consider combining the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) because a merger “would not be adequate given the shortcomings of the current SRO system,” said Ermanno Pascutto, executive director at FAIR Canada.

“Would a consolidation be in the best interests of the investing public and in the public interest? We urge the CSA to consider a new self-regulator model and SRO,” he added.

FAIR Canada suggested the CSA review should consider the degree to which provincial regulators rely on the SROs, and the inherent conflicts in self-regulation.

The organization also pointed to concerns about retail investor representation, enforcement transparency and the SROs’ policy consultation processes.

“The SROs’ current practices in areas like governance, transparency and enforcement raise important concerns. If the regulatory system is to continue to rely on SROs, improvements in those areas are needed,” said Douglas Walker, deputy director at FAIR Canada.

The group also called for added attention to investor compensation.

“Today the investor is left with limited access to justice and may never be properly compensated when she or he needs to take on a major financial institution,” said Pascutto.

“Let’s aspire to a new and improved industry self-regulator whose mandate expressly includes seeking compensation for harmed investors,” he concluded.

In February, the MFDA released a paper proposing a single new SRO, referred to as NewCo, that would have responsibility for mutual fund dealers, investment dealers, portfolio managers, exempt market dealers and scholarship plan dealers.

Following the paper’s release, IIROC told Investment Executive that the SRO would “continue to work with all stakeholders to develop solutions for the CSA to consider.”