IFIC Comments on Proposed Capital Markets Stability Act
Toronto, ON – July 12, 2016 – The Investment Funds Institute of Canada (IFIC) today submitted comments on the revised consultation draft of the federal Capital Markets Stability Act (CMSA), which was issued for comment in May. An earlier version of the draft act was circulated and commented on in 2014.
IFIC’s submission notes that the revised draft CMSA addresses some of the concerns raised by the association in its response to the initial draft; however, significant issues remain outstanding. The association also qualified its feedback, stating that its ability to provide comprehensive feedback remains limited until the industry has an opportunity to review the accompanying regulations.
“The industry appreciates clarifications that have been made to the definition of systemic risk, including the addition of a materiality qualifier,” said Joanne De Laurentiis, IFIC president and CEO. “However, the new draft authorizes the regulator to designate products or practices as systemically important or systemically risky without any requirement that the regulator consult with the affected firm or firms in advance of such a designation. The draft is also missing an express right of appeal and mechanisms for reversal or withdrawal of a designation. The CMSA should be amended to include these rights and remedies,” De Laurentiis added.
The mandates of several provincial regulators include the goals of supporting fair, efficient and innovative capital markets. IFIC’s submission encourages the government to expand the mandate of the proposed Capital Markets Regulatory Authority to incorporate similar language as a reminder of the importance of weighing the impact of regulatory decisions.
Responding to sections of the draft CMSA that address information/data collection, IFIC notes that responding to requests for data can be labour intensive and expensive for individual firms. The association proposes that the CMSA regulations be drafted to include a requirement to consult with the industry to establish a standardized process for management of all aspects of any information-gathering requests.
Lastly, IFIC identifies issues with the CMSA proposed approach to vicarious liability, which would make the investment fund manager fully liable for a violation committed by an investment fund. The submission points out that the language of the draft legislation does not take into account the arms-length structure of many mutual funds where some management functions may be assigned to a trustee or other service provider who may assume sole responsibility for those activities.
The investment funds industry continues to support the creation of a cooperative capital markets regulator. “An undertaking of this magnitude requires significant efforts by all parties,” De Laurentiis noted. “IFIC is committed to working with the federal, provincial and territorial governments to create a solid, workable framework that will serve the needs of both investors and the investment sector.”
The Investment Funds Institute of Canada is the voice of Canada’s investment funds industry. IFIC brings together 150 organizations, including fund managers, distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada’s savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canada’s mutual funds industry and its investors for more than 50 years.
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