The Investment Dealers Association has decided to bow to its critics and spin off its trade association function.

At a meeting last night in Montreal, the IDA’s board voted unanimously to spin off the trade association into a standalone enterprise.

The decision must go before the organization’s members for approval. A vote will likely be scheduled for Dec. 15, and in mid-November the IDA will issue a document laying out its plans.

IDA president and CEO, Joe Oliver, says that ahead of the meeting he’d consulted widely with the industry and feels that there is strong support for the move. A simple majority will be enough to decide the issue.

Oliver reports that the decision is voluntary, it’s not being forced to a split by regulators or other outside forces, but the IDA recognizes that the environment has changed — there is less tolerance for perceived conflicts than there has been in the past, and so it has decided to deal proactively with this perceived conflict.

Oliver maintains that the real conflict at the IDA is the one inherent in self-regulation, and that the dual mandate has never been more than an optical problem. He insists that there is a substantive advantage in the dual mandate, but that there will be advantages to a split too — it will resolve the optical problem, it will give the industry a trade association that’s unburdened by a public interest mandate, and it may pave the way for consolidation of self-regulation.

While there are no active negotiations underway, the IDA has openly sought to merge with the other industry self-regulators, Market Regulation Services Inc. and the Mutual Fund Dealers Association. The MFDA’s board has just voted not to consider a merger, so the first overture will likely be to RS.

MFDA president and CEO, Larry Waite confirms that the MFDA board met earlier this week to discuss the issue of SRO consolidation, and decided that, “it was not in the public interest to enter into discussions with the IDA at this time.” Waite says that it is preparing a document that will lay out its reasons for not supporting a merger

Oliver notes that the decision to spin off the trade association is not contingent on a merger. He adds that it will be also moving the governance of the IDA to 50% public directors, resolving another issue that has been cited as an SRO merger obstacle.

Current IDA chair, Ross Sherwood, is heading up a steering committee that’s working on the spin off proposal. It will present members with a fully-formed plan about how the new organization will work — dealing with issues such as its mandate, funding and governance.