The dual mandate of the Investment Dealers Association of Canada was an obstacle to the consolidation of self-regulatory organizations and an optical disaster. But it was the industry’s ability to lobby that really suffered. Now that the two functions have been divided, the new industry association’s challenge is to prove it can be a valuable voice for its members.

The securities industry has had its own trade association since April 1, when the IDA was formally split. The hard part lays ahead: persuading a cost-conscious bunch that a lobbying group is something they want to fund.

Funding isn’t an immediate concern because the old IDA provided start-up financing from the sale of its educational arm. The money gets the new industry association — as yet unnamed — off the ground and will enable it to keep its fees low for the first few years, says president and CEO Ian Russell. Afterward, it hopes members will recognize the value in having a dedicated industry advocate.

That value, says Russell, will be created through advocacy on important public policy issues that affect the securities industry, such as tax reform. The association will also be involved in industry rule-making and helping members run their businesses by assisting with compliance and providing education.

“Our objective is to become the authoritative voice in the Canadian capital markets on policy matters and market matters,”Russell says.

Having an organization with that sole focus should also ramp up the quality of debate around industry issues. “We can be much more aggressive as an advocate [while] being an industry association than we could before,” Russell says. “We really were hamstrung, on everything [with the dual mandate].”

Creation of a dedicated advocate benefits not only the industry but also regulators, he says, because they will get an undiluted understanding of what the industry thinks about a given issue. “At least the regulators will know where we stand. We couldn’t do that on anything before because, as a self-regulator, we were under the oversight of the commissions. There was always a concern about that dual role and a concern about speaking out too aggressively as an association.”

Moreover, in the past, the industry had a hard time criticizing the IDA’s performance as an SRO, because the lobbying voice was part of the same organization. “We [now] have an obligation to scrutinize the operations of the SRO, too, to make sure that it’s operating efficiently,” says Russell.

He suggests an independent association will bring the industry closer together and stimulate more dialogue, which — at the end of the day — will lead to better rules. He envisions a group that will become an active participant in the regulatory rule-making process, comment on proposed securities commission and SRO rules, and question whether rules are strictly necessary to achieve a given regulatory objective. This organization will ensure rules are appropriate and push regulators to make certain that their initiatives can pass a cost/benefit test. Once rules are passed, he anticipates the association will play a role in providing guidance to firms to ensure that they know how to comply.

There are already several big issues high on the fledgling organization’s agenda. One is pushing regulators to allow personal incorporation by brokers. The new group would also like to see an end to limitations on investment dealers employing fund dealer reps.

These structural issues personify the agenda the new industry association will pursue in general: seeking maximum flexibility for firms to operate as they see fit, with minimal restrictions on their trade, as long as investor protection is maintained.

For example, an investment dealer can currently employ up to 100 mutual fund reps, but the reps must move up to fully registered status within 270 days of joining the firm. Russell argues the restrictions should be scrapped altogether, allowing firms to structure themselves as they see fit.

The restrictions were designed to prevent an exodus of members from the Mutual Fund Dealers Association when it was trying to get off the ground, he acknowledges, but he adds that securities commissions should not be making rules solely to ensure the viability of an SRO. “The SRO should be there if there is a business case for it,” he argues.

Russell maintains that firms that run both fund dealers and investment dealers should be able to run off one platform. “You get a lot of efficiencies from that, take a lot of costs out — and the investor benefits,” he says.

@page_break@The group also favours improving regulatory efficiency wherever possible, which means it supports SRO consolidation. It is also a fan of the passport model, and hopes Ontario joins the initiative and the model is refined to allow creation of a true registration passport, which would lower the compliance burden for firms.

It is also supportive of the single regulator initiative being championed by Ontario, and of the latest province-based model for such a beast developed by the Crawford panel.

On the broader public policy front, Russell says, the trade association is a big proponent of cutting capital gains taxes. In the Conservatives’ election platform earlier this year, they proposed deferring most capital gains taxes under certain conditions. However, the government then failed to make good on its promise in its first budget.

“We want to see the government move forward with its announced intention to lower capital gains taxes,” says Russell. “We’ll help it construct something that’s a workable model. That’s a key objective,”

The group is also seeking to push back the deadline for income trusts to file tax reports to the end of February from the end of March, a change that would give advisors more time to prepare tax receipts for their clients before the filing deadline.

In developing sound policy positions on such issues, it is critical for a trade association to foster good communication with its members. When rules are proposed, it can then collect a variety of industry opinions and distill them into a relevant and persuasive comment. To that end, the new association will be adopting a committee structure similar to that of the old IDA. It will have committees for retail sales, investment banking, regulatory compliance and other topics, to work on specific issues and facilitate communication.

It is also trying to maintain the national scope of the old IDA. Russell says it will operate offices in Toronto, Montreal, Calgary and Vancouver. The association is securing new office space and moving out of the IDA offices in each location. Concluding there isn’t enough work for a full-time job in Atlantic Canada, it has closed its Halifax office, but is putting together regional councils — analogous to the IDA’s district councils, but without a regulatory role — that will include Atlantic Canada, along with Ontario, Quebec, British Columbia, Alberta and Manitoba. It’s not yet clear whether Saskatchewan will fall under one of the other Prairie provinces’ councils or have its own.

One basic obstacle to establishing communication with the industry is the fact that the new group’s name remains uncertain. The original plan was for the trade association to retain the IDA name, and the self-regulatory organization to take a new name. The SRO’s first option was rejected, however. Russell says the process of choosing a new name has been complicated by the fact that the IDA has status as a recognized SRO in the provincial statutes. As well, the SRO is contemplating a merger with Market Regulation Services Inc. Assuming that merger goes ahead, it may well need a new name of its own.

For now, Russell’s group is going with IDA Industry Association. But given the trouble sorting out names and the need to develop its own brand, Russell admits it is contemplating giving up the IDA name and picking an all-new moniker.

No decision has been made on this, but a name is under consideration. The group is also working on a new logo, which it hopes to have ready for its annual conference in Whistler, B.C., on June 25 to 28. It has also developed its own Web site.

The new association is also fully staffed. It started with a core group of professionals from the industry relations and representation side of the old integrated IDA. Russell says some people worked on both SRO issues and trade association issues in the old IDA, so they have had to choose whether to stay with the regulator or go with the new group. The IDAIA has made some strategic decisions, such as doing away with its economist position, on the basis that it doesn’t need to be in the business of providing economic analysis. Instead, it’s focusing resources on policy analysis.

It has also added a fair amount of new blood, including its own director of public affairs, Annie Cote-Kennedy, formerly of Sun Life Financial Inc. Barbara Amsden has joined from the Canadian Depository for Securities Ltd., as director of capital markets, and the Montreal office is headed by Jacques Lemay, formerly of National Bank Financial Ltd. Susan Copland is leading the Vancouver office, coming over from TSX Venture Exchange Inc.

The new organization is also developing its governance structure, deciding on the proper size and composition of its board and an election process. For now, however, it has an interim board comprising 12 industry executives. That board has approved the organization’s decisions to date, and is expected to consider a formal governance structure at the annual meeting.

Membership includes all the firms that were in the integrated IDA. As a voluntary association, it is going to have to justify the expense of joining to its members. Down the road, Russell imagines that the membership could expand to include fund dealers and financial planners.

For the time being, however, it has a full plate getting the new group up and running and throwing off the muzzle it had worn as part of the dual IDA mandate. IE