A new self-regulatory organization (SRO) was formed in Canada this week, merging the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada (MFDA), following ongoing discussion and consultations with the Canadian Securities Administrators (CSA).
There has been increasing overlap between the two regulatory bodies, and IIROC has been advocating for the merger for some time now. Canada is the only G20 country without a national regulatory body. While a second phase could include even more registration categories that are currently under provincial regulators, the initial reform comes in response to inefficiencies, duplicate regulations and confusion from investors.
The implications of an SRO for Canadian advisors are far-reaching. IIROC President and CEO, Andrew J. Kriegler, said in their press release that this new pan-Canadian SRO will "better protect investors, increase access to advice, and support innovation." This is following IIROC’s announcement last August, stating that the consolidation could save almost $500 million in the next ten years across the financial services industry.
The CSA has also said that this new SRO will:
CSA chair and president, Louis Morisset, says the new SRO is "designed to protect Canadian investors and enhance public confidence, accommodate innovation, ensure fair and efficient market operations and navigate continually evolving industry conditions."
Advisors are already responding in favour of the merge. Jason De Thomasis, the COO at De Thomas Wealth Management thinks it’s a good idea, with a lot of support from the industry, because advisors no longer have to interpret two sets of similar regulations.
Jayson Horner, President, CEO, and Co-Founder of The CanDeal Group, said “this development is the catalyst to drive efficiencies and innovation for member firms and their clients.” As stakeholders in the ongoing consultations, CanDeal is a joint collaboration between Canada’s major banks and financial services companies, dedicated to delivering compliant, interoperable solutions to drive higher-performing workflows with market participants.
Evolving regulatory conditions across the financial services industry create challenges for Canada’s wealth managers, especially those in the process of navigating digital transformation and automating their current operations. The new SRO may eventually impact these operational aspects of asset and wealth management:
“To improve client access to products and advice — and in some instances reduce dealer costs — the paper outlined various solutions such as: allowing introducing arrangements between mutual fund dealers and investment dealers, whereby the former contracts out some of its operations to the latter as a way to access back-office and clearing systems; enabling dual-platform dealers to include both types of businesses within one legal entity and integrate back-office functions; proposing rules for centralized client data gathering; and enabling more part-time advisors in all dealer platforms.”
If operational solutions like integrated back-office systems see the light of day, advisors will celebrate aspects like central data gathering; however, these solutions will simultaneously have sweeping impacts across firms who have started digitalizing their back office. Working with a custom automation partner, like Mako Fintech, will allow our customers to easily adapt to upcoming regulatory changes as they unfold. Agile technology that can be configured to the evolving needs of any wealth management professional is needed now more than ever.