MFDA proposes new regulatory model

By Kate McCaffery | February 03 2020 03:26PM

The Mutual Fund Dealers Association of Canada (MFDA) released a new special report on securities industry self-regulation Feb. 3, entitled A Proposal for a Modern SRO. In it, the MFDA proposes that regulators employ a “blank page approach” to create a new SRO.

If implemented, it says the MFDA would no longer exist as a separate SRO, allowing for the establishment of an “ideal” SRO, “based on meaningful cooperation with CSA (Canadian Securities Administrators) members, SROs (self-regulatory organizations), industry and public stakeholders.”

Current model is burdensome

In its guiding framework document, released alongside the new report, the MFDA says “there is broad agreement that the current multi-regulatory model is unnecessarily burdensome, costly, inefficient and susceptible to risk. While it remains unclear exactly what form future change might take, there is no doubt that a rethink of the existing structure is due. The recently announced SRO framework review by the CSA recognizes that such a review is in order,” they write. “By designing a new SRO from the ground up, rather than simply patching together existing structures, there is an opportunity to pursue meaningful change which will create real and lasting benefit for Canadians.”

Dubbed “NewCo” in the MFDA’s report, the proposed regulator would consolidate many of the existing elements of securities regulation in Canada. It says NewCo’s members would include current mutual fund dealer members of MFDA, investment dealer members of the Investment Industry Regulatory Organization of Canada (IIROC) and non-SRO registrants such as portfolio managers, exempt market dealers and scholarship plan dealers that the CSA collectively determines appropriate in the public interest. NewCo’s mandate would not include market regulation or surveillance.

Nimble and competitive

“We believe there is a significant opportunity to improve the current system by providing for a modern SRO that is investor-focused, nimble and competitive,” says the MFDA’s president and CEO, Mark Gordon. “It is my sincere hope that the MFDA special report will assist and support the CSA and other relevant stakeholders in the CSA’s recently announced SRO review.”

To learn more, consult the report and guiding framework document.

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