New Year, New SRO: Canada’s new single self-regulatory organization
On January 1, 2023, Canada welcomes a new Canadian self-regulatory organization and a new Canadian Investor Protection Fund. We take a look at the details.
The New Year isn’t only a time for resolutions, in Canada’s case it’s also a time for new regulation as the country moves to welcome the New Self-Regulatory Organization of Canada (New SRO) and a new Canadian Investor Protection Fund (New IPF). These “key milestones” come into effect on January 1, 2023 after years of planning and deliberation from Canadian securities regulators.
What is the New SRO and New IPF?
The new organizations are, in essence, a consolidation of existing bodies into new, more robust frameworks. The New SRO had initially been mooted in CSA Position Paper 25-404 in August 2021 and aims to consolidate the functions of both the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).
The New IPF, on the other hand, combines two existing investor protection funds – the Canadian Investor Protection Fund (CIPF) and the MFDA Investor Protection Corporation (MFDA IPC) – into one, which will independent of the New SRO.
Both the New SRO and the New IPF received approval notices in November 2022, and are in effect as of January 1, 2023.
Commenting on the formation of the new organizations, Canadian Securities Administrators (CSA) Chair, said that he is “very pleased” with the support shown by the industry, adding:
The regulatory framework for the New SRO and CIPF incorporates feedback we received and will enhance investor protection and public confidence through stronger accountability. It also allows for further innovation in our evolving industry.”Stan Magidson, Chair, Canadian Securities Administrators
What function do the New SRO and New IPF serve?
The New SRO has a “clear public mandate”, which aims to “advance the fostering of fair and efficient capital markets”. Following its formation, it will aim to protect investors from unfair, improper, fraudulent practices by its members, as well as maintaining public confidence in capital markets. This will be achieved through a robust compliance, enforcement and complaint handling resolution processes.
The new bodies will serve a secondary purpose – to inform and instruct investors through a consistent and proportionate education program. The New SRO will place a focus on methods through which to engage with investors, including such things as an investor office and an Investor Advisory Panel, which will provide independent research on regulatory and public interest bodies.
The amalgamation is important to Canadians and their financial futures. Investors will be able to access advice on their own terms and expect advice to adapt to their changing needs throughout their life.”Andrew Kriegler, President and CEO of IIROC and newly appointed CEO of the New SRO
It is hoped that under the New SRO investors will have easier access to varying products and so will not have to change advisors as their investment needs change. It should also level the playing field for regulators and investment firms across Canada.
How will the New SRO work?
Initially, the New SRO will have two member classes – Dealer Members (consisting of investment dealers and mutual fund dealers) and Marketplace Members (consisting of recognized exchanges, quotation and trade reporting systems, and other organizations that facilitate the trading of securities or derivatives in Canada).
The SRO will have an initial governance board consisting of 15 members, eight of whom are independent and seven who will represent the Members.
Transition plans and interim rules have been unveiled by the CSA, with guidance including registration guidance housed within a New SRO website.