No one is happy these days with financial services regulators or the regulatory system. Seldom has confidence in — and respect for — regulatory ability been so low. But how can this be, given the vast resources, studies and initiatives that have been devoted to remedying shortcomings in this sector?

Investors and financial services intermediaries are equally frustrated and unhappy — albeit for different reasons. At the heart of investor concerns is the conviction that regulators are failing to live up to their investor protection mandate and are pitting investor protection against industry interests. Industry concerns centre on the multitude of overlapping regulators, regulation, complexity and costs.

Where are the regulators in all of this? Presumably, they are concerned and are attempting to remedy the concerns.

The question is: what can they do to make their efforts effective? It seems that little effort is devoted to this. All the public sees are studies about what they have done or are planning to do.

Take enforcement, for example. It’s so bad that the RCMP is investigating whether the handling of certain enforcement matters at the Alberta Securities Commission involved criminal conduct. In Ontario and Quebec, there are questions about how enforcement matters are handled, the process for deciding which matters will be dealt with, time delays, penalties and the effectiveness of enforcement as an investor-protection measure.

The Ontario Securities Commission and the Investment Dealers Association of Canada have said they are looking at enforcement matters, with the OSC rethinking its approach to penalties and shifting its focus from causing violators to mend their ways after they have been caught to deterring them from violating the rules in the first place. The IDA is also rethinking its attitude toward penalties and exploring ways of collecting its fines.

This is good, but is it really going to make a difference to investor confidence or the way the industry operates? In Canada, there is a tendency to study issues to death and to come up with the same concerns and proposals for remedying them but never carry through on their implementation. The IDA task force is currently spending millions of dollars or more on these studies.

Perhaps it’s time to concentrate on the registration and compliance processes. If regulators spent more time ensuring that persons and firms who deal in — or give advice on — securities were suitable for registration and met well-identified conditions before, as well as throughout, their term of registration, that would go a long way toward reducing or nipping in the bud enforcement issues that arise out of registrants’ wrongdoings.

The registration, compliance and enforcement processes need to be looked at as a continuum. Currently, they operate as silos.

Another area in which a fresh approach is needed relates to improving the competency standards registrants are expected to meet. There is a need to introduce independence and objectivity into the process of identifying and setting these standards, designing the curriculum, determining and measuring the performance indicators and accrediting the institutions that can offer the courses.

Right now, there is a lack of independence and objectivity with respect to all these aspects. Competency, although no assurance against wrongdoing, should assist in monitoring the registration and compliance processes, as well as reducing the number of matters that become enforcement issues.

A third area that regulators should address, which will have a huge practical impact, is the establishment of an effective means for investor disputes with registrants so they are dealt with fairly, expeditiously and affordably. This would go a long way toward restoring investor confidence and would allow regulatory enforcement to focus on the broader public interest objectives.

It’s all well and good for regulators to say that they are taking a “risk-based” approach to what they do. But it’s time for regulators on the ground to remedy the realities that individual investors face when they come into contact with the regulatory system. IE