Now that the Investment Industry Regulatory Organization of Canada’s (IIROC) first-ever chief has moved on, we can only hope that her successor is as tuned in to the need for sound investor protection and credible self-regulation.
Susan Wolburgh Jenah, as IIROC’s first president and CEO, led an organization that has successfully navigated a major financial crisis; grappled with increasingly sophisticated, and fragile, markets; and at least tried to tackle some of the long-standing issues in retail investor protection. IIROC also seeded the Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada).
Yet, many of these issues remain works in progress, particularly on the retail side. Several key retail investor-protection issues have yet to be resolved. And others haven’t even been broached. IIROC never really has taken a position on whether retail investment advice should be subject to a statutory “best interests” duty or if trailer fees should be abolished. Hopefully, Andrew Kriegler, IIROC’s new CEO as of Nov. 1, won’t shy away from these thorny issues. Just as important, he must work to maintain the credibility of self-regulation. To a cynical outsider, the concept of self-regulation often is little more than the proverbial fox guarding the henhouse.
But there is real value to self-regulation, in terms of both effectiveness and efficiency, compared with the level of the oversight that the provincial regulators could provide. This is particularly the case in Canada, where the self-regulatory organizations (SROs) also have the fundamental advantage of being national.
In order to maintain the advantages of self-policing, the new IIROC CEO must ensure that the SRO remains credible – not only with its industry but also with other regulators and, most important, investors. The most visible signal of credibility is enforcement, which must remain tough but fair. But policy development is just as important. IIROC must continue its efforts to carry out original research in unexplored realms, such as the SRO’s ongoing work on high-frequency trading, and to develop innovative policies that aim to resolve market failures.
© 2014 Investment Executive. All rights reserved.
B.C. files four unexplained wealth orders so far
Two provinces fight crime with expanded civil forfeiture powers