On August 3, 2021, the Canadian Securities Administrators (CSA) published CSA Position Paper 25-404 – New Self-Regulatory Organization Framework (Position Paper), announcing its plans to create a new single Self-Regulatory Organization (New SRO). The Position Paper is a product of the SRO Framework Review Project that began in December 2019 with the formation of a CSA working group (Working Group) to study the current SRO regulatory framework.
The CSA stated that it has decided to pursue the establishment of the New SRO, after evaluating a number of other options.
The establishment will be carried out in two phases. In Phase 1, a CSA integrated working committee (IWC) will determine the appropriate corporate structure for the New SRO and define and oversee the execution of the implementation strategy, focusing on i) the integration of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) into the New SRO, ii) the harmonization of the rules, policies and related processes of the current SROs and iii) making changes to the governance of the New SRO by strengthening the CSA’s oversight framework. Following completion of Phase 1, the project will enter Phase 2 where the CSA will consider incorporating other registration categories such as portfolio managers, exempt market dealers and scholarship plan dealers into the New SRO.
Some of the specific plans for the New SRO include:
- Creation of formal investor advocacy mechanisms, as well as a separate investor office charged with investor education and outreach, within the New SRO;
- Reviewing the proficiency requirements applying to investment dealers and mutual fund dealers;
- Reducing industry cost by:
- Allowing introducing / carrying broker arrangements to allow mutual fund dealers to access certain products more easily, such as ETFs;
- Reviewing the current SRO fee models for dual platform dealers;
- Enabling dual platform dealers to include its mutual fund dealer and investment dealer businesses within one legal entity and integrate similar compliance and back office functions to realize economies of scale;
- Harmonizing applicable policies and rules into a consolidated rule book to reduce operating costs; and
- Reviewing the rules on directed commissions (although no specific proposal was made as yet, other than that the CSA will form a working group comprising appropriate CSA stakeholders).
The Position Paper also referred to the consolidation of the two current investor protection funds into a single protection fund which will be independent from the New SRO.
The Working Group will consider comments no later than October 4, 2021. The IWC will make a public communiqué that includes an implementation timeline once it has determined the appropriate corporate structure for the New SRO as part of its work in Phase 1.
August 31, 2021