Written By James Heelan, Matthew Riskin and Denise Brundson
On September 29, 2022, the members of the Mutual Fund Dealers Association of Canada (MFDA) and of the Investment Industry Regulatory Organization of Canada (IIROC) announced that they have approved the amalgamation of their respective self‑regulatory organizations (SROs), subject to certain conditions outlined in their combination agreement.
As a result, the MFDA and IIROC will become one organization temporarily known as the New Self-Regulatory Organization of Canada (New SRO), effective January 1, 2023.
The MFDA was established in 1998 in response to the growth in popularity of mutual funds in Canada. It is the SRO for the distribution side of the Canadian mutual fund industry, with a stated goal of regulating operations, standards of practice and business conduct of member dealers and their representatives.
IIROC was established in 2008 when the Investments Dealers Association of Canada and Market Regulation Services Inc. were consolidated. Most firms, and their registered representatives, that are in the business of advising on, or trading in securities in Canada are members of IIROC and follow IIROC rules for business conduct, financial operations and trading practices.
Both the MFDA and IIROC currently have mechanisms by which investors may file a complaint with respect to member firms or their registered representatives. These SROs have the authority to investigate and discipline members upon becoming aware of an issue, either by way of an investor complaint or otherwise.
The move to a New SRO is intended to achieve efficiencies, however the two organizations have historically approached regulation and enforcement in different ways and integration will have its challenges. This may well have ripple effects for member firms.
Implementation of the New SRO will mean that investment firms and their registered representatives must ensure compliance with whichever framework the organization adopts for its rules. There will undoubtedly be significant changes ahead, both with respect to compliance and enforcement.
If you have any questions about compliance under the new framework, please contact the Regulatory group.