The Investment Dealers Association of Canada has just published the information circular concerning its proposed merger with Market Regulation Services Inc. (RS)

The transaction must be approved by 75% of the votes cast. A special meeting of IDA members is scheduled for December 17, at the Royal York Hotel in Toronto, to consider the deal. It does not require the approval of the firms that RS regulates.

“The objective of combining the IDA and RS is to create a single, independent self-regulatory organization with broader scope and the requisite capacity to regulate markets and market participants (dealers and others) and inform and be responsive in a timely and effective manner to rapidly evolving market developments,” the circular says. “This will be achieved by simplifying, streamlining and consolidating market and dealer regulation within a single independent entity with a view to enhancing the quality and effectiveness of the self-regulatory system, thereby maintaining fair, efficient and transparent markets and enhancing investor protection.”

If the deal is approved, the new SRO will combine the regulatory activities of each of the IDA and RS in a single organization. The new self-regulatory organization will be a non-share capital corporation with two classes of members — dealer members and marketplace members. Both classes will have the same rights and entitlements, and each member will have one vote.

The new SRO will regulate dealers in a manner similar to the IDA’s current regulation, and it will regulate the trading conduct of members and subscribers that participate directly in its marketplace members. All members will also remain subject to oversight and regulation by the Canadian Securities Administrators.

The board of new organization will consist of 15 directors: five directors representing the dealers, two representing the marketplace members, seven independent directors and the CEO.

“The combined organization is being designed to specifically ensure broad policy input and timely, responsive and cost-effective regulatory initiatives and a stronger SRO that is positioned to assume, over time, additional functionalities and responsibilities, for the benefit of all market participants,” the circular says, noting that these general objectives reflect the unanimous endorsement of the firms responding to a survey on the proposed combination.

The circular also notes that the survey confirmed that significant cost savings were not expected as a result of the merger. “The only significant disadvantages of the combination cited in the survey were transitional and implementation issues,” it states.