It is something that I have been ruminating on, but which has been brought to a head by some recent e mail exchanges: regulatory change of the type seen in the UK and Australia has just not happened in Canada where the regulators seem more concerned over fine tuning the largely transaction based retail regulatory model. Despite the creation of the Investor Advisory Panel (and the IAC before it) and a decade or more of work on the Client Relationship Model and Point of Sale disclosure, nothing much has really happened.
Regulators seem obsessively focussed with improving a model that does not work for consumers and politicians, mystifyingly, are not interested. The OSC appears to be listening to arguments through setting up the IAP and regulators appear to be willing to fund discourse (via FAIR Canada) but, let us face it, the IAP lacks the experience, the resources and the voice to effectively challenge the status quo and FAIR lacks the financial independence to be able to step away from its paymasters.
The following is a copy of my e mail response to the discussion that has been flowing yesterday and today:
“I tend to think the regulators are trying to batten down the transaction based model as opposed to opening it up and bringing in higher standards and greater retail advisory accountability. I think the IAP is a +ve, but not everything about it and the situation it finds itself in is as +ve as it needs to be – I think we need more commitment from the OSC in terms of funding and evolution of its remit before we can say it is being effective. I would say rather that it, or rather the elements that are seeking change, is/are being well contained. Too many data points suggest otherwise. Any other direction would require a political objective within the OSC that conflicts with that of the status quo, and I am not sure the OSC or the CSA is the type of establishment where bold political stakes are placed.
It is easy to say that you (OSC) are going to review issues brought up by the IAP, but it is another to put your weight behind them and actually implement. THE IAP is weak (lacks resources and a method of communicating to a public forum) and it is easy to give the impression of engagement (OSC) while in reality doing little but going through the motions. If I was Machiavelli, and liquidating your opponents was politically incorrect, I would recommend this type of manoeuvre. It would also give you (OSC) a bit more leverage with the institutions, keep them worrying a little bit, in order to smooth the management of regulation, but as to making change, no, there is insufficient evidence of such intent.
I also tend to believe (with some regret) that formal engagement by investor advocates with respect to real change, in Canada, legitimises the process by which regulation is reviewed, and by virtue of this the unsatisfactory outcomes that arrive from that process.
Engagement on issues that do not really challenge the status quo (I tend to think that much of what FAIR does is covered by this umbrella), or that improve its management from a regulatory perspective, are still worth pursuing within “the process”. But otherwise, disengagement from “the process” while continuing to militate for change may be an alternative worth considering, where real change is the objective.
At the moment you have to ask yourself, “is the OSC suing or pressing for peace?”.”