Canadian regulators approve and recognize new self-regulatory organization

The Canadian Securities Administrators (CSA) announced November 24, and published notice that regulators in Canada officially recognize the New Self-Regulatory Organization of Canada (New SRO) and approve of the new Canadian Investor Protection Fund, both of which come into being on January 1, 2023.

The New SRO will be the result of a merger of the country’s existing self-regulatory organizations (SROs), the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC). In addition, the CSA also indicated that it would combine the two current compensation fund organizations, the Canadian Investor Protection Fund and the MFDA Investor Protection Corporation into a single compensation and contingency fund organization independent from the New SRO.

The published notices indicate that the new temporary legal name of the New SRO will be the New Self-Regulatory Organization of Canada, while the protection and contingency fund organization will continue as the Canadian Investor Protection Fund.

The notices published reportedly reflect comments received from stakeholders in response to various requests for comment and public consultations. The proposal to consolidate the functions of IIROC and the MFDA was outlined in a CSA position paper back in August 2021. 

The CSA says prior to the close of amalgamation, the Autorité des marchés financiers will publish final amendments to put a transition plan into effect for mutual fund dealers registered in Quebec.

Regarding the investor protection fund, they also say mutual fund dealers in Quebec will not be required to contribute to the fund for customer accounts located in Quebec. (Quebec accounts will in turn not be eligible for coverage from the Canadian Investor Protection Fund.) Quebec mutual fund dealers will instead continue to contribute to the Fonds d’indemnisation des services financiers (Quebec financial services contingency fund), as required by law. “Their clients will continue to be eligible for the payment of indemnities by this fund,” the CSA writes in its notice of approval for the investor protection fund.

“Members are encouraged to reach out to IIROC and MFDA staff to understand how the interim rules apply to their unique circumstances,” the CSA writes in a statement announcing the publication of the recognition orders, interim rules, fee guidelines and other details, including a summary of changes made in response to stakeholder feedback.   

They add that existing regulations referring to IIROC or the MFDA or both will be treated and interpreted going forward as references to the New SRO until amendments are implemented as necessary.