Canadian Regulator Needs Overhaul, Report States

A report commissioned by the Investment Dealers Association of Canada (IDA) has recommended significant changes in how the regulator and trade group manages itself and the brokerage industry.The report, prepared by the Boston Consulting Group and presented to IDA directors in mid-January, says that the organizations dual role requires steps to ensure fairness. The report singles out for attention

A report commissioned by the Investment Dealers Association of Canada (IDA) has recommended significant changes in how the regulator and trade group manages itself and the brokerage industry.

The report, prepared by the Boston Consulting Group and presented to IDA directors in mid-January, says that the organizations dual role requires steps to ensure fairness. The report singles out for attention regulatory and disciplinary matters, and suggests the creation of a regulatory subgroup overseen by outside directors.

Although initially a trade group, the IDAs mandate expanded in 1996 when it was handed the job of overseeing brokers from the Toronto Stock Exchange. At that time many criticized the change because of the problems inherent in functioning as both a trade group and a regulator.

To overcome that perception, the consulting groups report says the IDA must clearly separate its roles by using separate staff and resources for each area.

According to IDA President Joseph Oliver, IDA members are in agreement with most of the reports key points and will move quickly toward implementation. We will hire a corporate governance expert to give us advice on setting up a new committee, and we will create a senior vice president position, to be filled from outside our organization, to oversee that committees functioning, Oliver says.

In addition to recommending the separation of trade group and regulatory functions, the report also urged the organization to address relations between its few powerful large members and the far more numerous smaller broker/dealers. The consultants suggested a committee be established to represent the needs of the smaller members. A fee adjustment should also be considered because the smaller firms pay disproportionately higher membership dues and regulatory fees, the report says.

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