PMAC Letter: Fundamental changes to regulatory landscape in the air

The interests of portfolio managers’ clients are better protected under the current system of regulatory oversight, argues PMAC president Katie Walmsley

Various industry bodies, self-regulatory organizations (SROs) and other groups have recently issued reports and proposals focusing on improving regulatory oversight of dealers, gaining efficiencies and reducing regulatory burden. A dominant theme in these papers is that a new, larger SRO would be the means to secure these improvements.

Two of the more contentious proposals come from the Capital Markets Modernization Taskforce and the Mutual Fund Dealers Association (MFDA). Both contemplate the creation of a single SRO that covers all advisory firms, including portfolio managers (PMs), exempt market dealers and scholarship plan dealers.

However, the Portfolio Management Association of Canada (PMAC) believes this would be the wrong course. The interests of pension plans, foundations and private clients that have entrusted trillions of dollars in assets to PMs are better protected under the current system of regulatory oversight by the Canadian Securities Administrators (CSA), rather than under a system in which the CSA delegates its oversight role to a new SRO.

We strongly believe that the public interest is better served by PMs being directly regulated by the CSA and, long term, through a co-operative (national) securities regulator. Efforts have been ongoing for some time to establish such a regulator, known as the Cooperative Capital Markets Regulatory System.

CSA staff have the experience and expertise to understand the unique features of the PM business. They have proven to be tough but effective regulators with a strong regional presence across Canada, and have been consistent in approach to registrants regardless of firm size, whether they serve institutional or private clients, or whether they operate traditionally or online.

PMAC views PMs as fundamentally different from investment and mutual fund dealers. Registered PMs are in a singular relationship with their clients: they have discretionary authority over investments they manage for their clients and, more importantly, have a fiduciary duty.


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