A united voice
the toronto-based private Capital Markets Association (PCMA) and the Calgary-based National Exempt Market Association (NEMA) have combined forces in an effort to create a single, louder voice for their members in the private capital markets business.
The amalgamated association will continue to operate under the PCMA name and now has more than 2,000 members within
its ranks. The merger, announced in February, is designed to streamline both organizations’ operations and lobbying efforts.
“Ultimately, the private capital markets aren’t large enough, necessarily, to warrant separate interest groups,” says Craig Skauge, founder and president of NEMA, “and we felt that we could bring the best of both worlds together.”
Indeed, the merger follows several years of change at both associations. Case in point: Skauge, who also is president of Calgary-based Olympia Trust Co. Inc., originally launched NEMA in 2011 under the name of the Western Exempt Market Association. That organization was renamed NEMA in 2013 to reflect the increasingly national scope of its membership.
The PCMA, which focused primarily on Eastern Canada, originally was formed in 2002 as the Limited Market Dealers’ Association of Canada. Subsequently, the organization changed its name in 2009 to the Exempt Market Dealers Association of Canada before settling on its current moniker in 2014.
That both organizations have gone through such change isn’t surprising, given the ongoing evolution of the exempt-market space. More specifically, exempt-market dealers (EMDs) have faced higher regulatory requirements since 2009, including reporting, “know your client” requirements and higher proficiency standards for compliance officers and individuals trading in exempt securities.
The changes i ntroduced i n 2009 primarily affected EMDs (previously called limited market dealers [LMDs]) in Ontario and Newfoundland and Labrador; many companies i n Western Canada were exempt from registration requirements via the “Northwest exemption.”
This raft of regulatory changes and the possibility of more in the future are the drivers for a louder industry voice.
“As the number of regulations and the number of requirements for registration increases, having any influence is more difficult for smaller groups,” says Craig Geoffrey, assistant professor, teaching stream, in the finance faculty at the University of Toronto’s Rotman School of Business. (Geoffrey worked for a small hedge fund that was registered as an LMD between 2008 and 2010.) “So, it’s maybe a chicken and egg thing. But the more regulation there is, the more important [having a larger advocate] is for industry people.”
The first order of business for the newly merged organization is to bring its membership together. To begin with, the entire boards of directors of NEMA and the PCMA will join together, for a total of 45 directors.
The organization plans to reduce the board to 24 members by yearend. The board’s numbers will be pared down mainly through attrition, as some directors plan to retire or to step down in order to focus on specific advocacy efforts as members of one of the PCMA’s 10 committees.
“Our strength has been a relatively large board, [and] that has worked pretty effectively at the PCMA,” says Doug Bedard, the PCMA’s chairman and senior vice president and director of MNP Corporate Finance Inc. “So, that’s the structure that we envision going forward.”
Skauge plans to take a less active role in the newly merged organization for the foreseeable future i n order to focus on personal and professional responsibilities.
Before then, though, Skauge will be working to bring NEMA’s rank and file members into the PCMA fold. This month, Skauge will be contacting those individuals who are not also members of the original PCMA to invite them to join the merged organization.
The final count of PCMA members will meet formally as one organization at a conference in Toronto in April 2018.
“[NEMA’s rank and file] typically have followed my vision for NEMA, and I don’t foresee any hesitation from them to move over to the PCMA,” says Skauge. “Really, what our members want, whether it’s PCMA or NEMA, is good advocacy [on their behalf ].”
The new PCMA also hopes to streamline its advocacy efforts, but both Bedard and Skauge worry that the uncertain future makeup of Canada’s provincial regulators will make that a difficult task.
“One of the most important things for an advocacy organization such as ours is to have good relationships with regulators,” says Skauge. “But we don’t really know who’s going to be regulating what — neither does anyone else right now, given that the [proposed Capital Markets Regulatory Authority] still is in flux.”
Given both the uncertainty surrounding the creation of that national regulator and the fact that EMDs don’t have a selfregulatory organization, Bedard and Skauge say the PCMA will continue to advocate for more consistent regulations across the country — particularly for national product distributions, which they describe as a complex and expensive process.
“When you’re bringing out an offering in this market, there are a lot of idiosyncrasies among the provinces,” Bedard says, “and formatting something for Canadawide distribution still is quite a bit of work. There are a lot of efficiencies that we want to [achieve].”