There’s no shortage of ideas for cutting the costs of compliance within the investment industry – changing rules, accelerating the policy process, even shifting supervisors’ mindsets. Policy-makers are spoiled for choice. The hard part will be to focus – and act.
Ever since the Ontario Securities Commission launched its task force on reducing the regulatory burden this past autumn, the investment industry has been in overdrive, churning out suggestions. The regulator’s consultation paper on the issue produced dozens of responses, and the first of three industry roundtables on March 27 generated a still deeper pool of ideas. The long list of candidates for reform ranges from tweaking detailed requirements to a full overhaul of the regulatory framework.
Indeed, for this year’s Regulators’ Report Card, Investment Executive canvassed the industry’s top compliance personnel for their views on the best ways to cut their burdens. What we heard was that, by and large, the rules aren’t the issue – it’s the regulators. In short, there are too many – and there’s too much overlap and too much variation among them.
For many Report Card respondents, the best way to cut needless, unproductive bureaucracy is to consolidate the provincial regulators and the self-regulatory organizations (SROs). Of course, consolidation is easier said than done. The biggest obstacles are lack of political will and the instinct for existing organizations to protect their turf.
While there is an ongoing effort to merge some provincial regulators, there is no single entity with the authority to make that happen. And, even if it does, the result will be incomplete, with at least two of the Big Four provinces (Alberta and Quebec) not participating. Merging the SROs wouldn’t be easy either. Absent a major scandal that justifies dramatic action, the forces of inertia strongly favour the status quo.
For burden reduction to accomplish something, policy-makers must focus on what’s achievable, not on what’s sexy. With so many players on the field, grand initiatives often are doomed to fail.
Instead, the policy-makers must take concrete steps – dull stuff, such as rooting out redundant requirements – that will make life easier and less costly in some incremental way. Boring, but realistic and attainable.