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A regulator in association's clothing

To end confusion about its role, the MFDA is thinking of changing its name, KEITH DAMSELL writes


According to Webster's Dictionary, the word "association" is defined as "an organization of persons having a common interest." It's a loaded word that has been a burden for Larry Waite, president and chief executive officer of the Mutual Fund Dealers Association of Canada.

"A lot of advisers think we are a trade association. . . . We find that word [association] quite confusing. We are a pure regulator. Period," said Mr. Waite, adding that the MFDA's board will contemplate a name change this month.

Unfortunately, some of the MFDA's 181 membership firms are confused too. When the group was created in 1998, many executives envisaged a body quick to defend the interests of the financial advice community. What they've got, however, is a watchdog flexing its muscles. The MFDA had its first enforcement action in December, and nine hearings against errant advisers have followed. More are in the works.

The MFDA are "taking a very inflexible approach," said one fund industry veteran. "Advisers are guilty until proven innocent . . . it's not what people expected."

Meanwhile, industry regulation is increasing and putting more pressure on the bottom line. The MFDA's 2005 budget of $19.8-million will come from the coffers of member firms, many of whom also pay a chunk of the $29-million in annual fees gobbled up by the Investment Dealers Association of Canada (IDA). Joe Oliver, IDA president and chief executive officer, is a vocal supporter of merging the two groups and his message is finding an audience.

Bureaucracy within the fund industry is "intense," laments Joe Canavan, head of Toronto's Assante Corp. The duplication of services from the MFDA and the IDA creates "an enormous burden on the investor," he said.

As Mr. Waite sees it, the MFDA's critics are struggling with a new reality. Regulation of the fund industry is evolving to better protect the interests of investors and that doesn't come cheap. For example, prior to the MFDA, dozens of fund dealers had never been paid a visit by a regulator or had a compliance review. Today, firms must file audited statements each month.

"It's a quantum leap forward," Mr. Waite said. "From an investor-protection point of view, the public interest is much better served. Looking at it from the perspective of the dealer or the adviser . . . the burden has increased tremendously."

The proposed merger of the two regulators would weaken the MFDA's resolve and ignores the 80-year history of the IDA, he said.

"The majority of that history and culture is as a trade association, not a regulator," Mr. Waite said. "What confuses the world is the IDA has two mandates -- it is a regulator and a trade association."

So who is speaking on behalf of the fund industry? Many feel the sector is rudderless and lacks a common voice.

"What's missing is the defence of the industry," said David Goodman, president and CEO of Goodman & Co. Investment Counsel Ltd.

"One thing our industry does need is someone to standup and say this is a noble and honourable pursuit."

The leadership question raises serious issues about the mandate and effectiveness of the Investment Funds Institute of Canada. The trade group's annual Toronto conference begins Sept. 29. Tom Hockin, IFIC's long-serving president and CEO, is slated to leave in October and it's a safe bet the identity of his long-awaited and yet-to-be-named successor will be the buzz of the conference.

Telecom's three amigos

Global finance makes for strange bedfellows. Fund billionaire Michael Lee-Chin, seafood king John Risley and Newfoundland telecom ex-pat Brendan Paddick are key investors in a Caribbean venture.

The three men are the controlling shareholders of Columbus Communications, a private holding company sinking millions into telecom infrastructure. Columbus owns cable operations in Trinidad and Jamaica, and has a stake in Cable Bahamas Ltd.

Jamaican-born Mr. Lee-Chin has substantial interests in the region, including the National Commercial Bank Jamaica Ltd. Mr. Risley, meanwhile, is chairman of Clearwater Seafoods LP of Halifax and has a long list of diversified investments, including a Maritimes-based guitar company and real estate. Lastly, Mr. Paddick is the former head of St. John's cable firm Persona Inc. and is the current chairman of Cable Bahamas.

Clubs trump oars at Dynamic?

Is it high tide for Rowing Canada and Dynamic Funds?

Golf pro Mike Weir will take centre stage in Dynamic's fall advertising campaign touting the need for strong financial advice. Over the next few weeks, investors will see Mr. Weir and caddy Brennan Little in print, billboard and Internet ads, the first volley in a long-term partnership.

The golf deal raises questions about the future of Dynamic's eight-year marketing relationship with the Canadian National Rowing Team. The fund company says its rowing presence will continue via sponsorships. That said, don't hold your breath for ads featuring muscle-bound rowers next season.

© 2007 The Globe and Mail. All rights reserved.

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