Merger plan for watchdogs comes under criticism

The Investment Industry Regulatory Organization of Canada is proposing to merge with the Mutual Fund Dealers Association, a move IIROC says would reduce duplication and save millions of dollars that could instead be invested in growth and innovation in the investment industry.

The plan, made public Tuesday, was developed to present to the Canadian Securities Administrators to consider in a planned review of the industry’s self-regulatory organizations later this year.

However, it immediately drew a rebuke from the head of the MFDA, which is advocating to start from scratch to create a new self-regulatory organization for the industry.

The idea of merging the MFDA and IIROC, which oversees firms and financial advisers, has been suggested over the years to reduce overlap. The latest such suggestion came last fall in a report from the C.D. Howe Institute.

“Our proposal can be implemented within three months, delivering real, tangible benefits to Canadians and to the industry within a year of approval from the CSA,” said Andrew Kriegler, IIROC’S chief executive.

The national self-regulatory agency has been working with an independent consulting firm to conduct a cost-benefit assessment of the proposed merger and plans to publish that report in the coming weeks.

IIROC grew out of the Investment Dealers Association, while the MFDA was created in 1998 as the mutual fund business boomed.

In a statement late Tuesday, MFDA chief executive Mark Gordon criticized IIROC’S merger plan, saying “it is clear their proposal is meant to benefit only industry, not investors or the public.”

He countered that any “serious” revision to Canada’s self-regulatory industry oversight needs to address the issue of public confidence.