Independent financial advisers are pushing back against new regulations for mutual fund advisers, arguing it will be too easy for the industry's regulator to hold secret hearings to cancel a broker's registration to operate.
The Ontario Securities Commission (OSC) said yesterday that it will hold a hearing June 5 to consider a complaint from the Independent Financial Brokers of Canada (IFB), which represents about 4,000 independently employed financial services advisers across Canada.
The association is protesting a new bylaw adopted last year that allows the Mutual Fund Dealers Association of Canada (MFDA), a self-regulatory organization overseeing the mutual fund industry, to suspend or terminate the registration of a mutual fund salesperson under various circumstances.
IFB lawyer Alistair Crawley said advisers are concerned that hearings can be held without notifying the affected person or giving them the right to attend, using broad new language that allows a secret hearing if notification "would be prejudicial to the public interest."
Mr. Crawley said the IFB accepts that there will be cases where the MFDA needs to act quickly to protect clients, but said the new bylaws are too broad. "What this rule does is it ignores the fundamental principle that there will be no proceeding brought against you without the provision of reasonable notice, which is one of the cornerstones of the principle of natural justice," Mr. Crawley said.
The dispute pits the MFDA against many of the independent mutual fund brokers it regulates, who say the watchdog's desire to beef up its powers to protect investors has to be balanced against the protection of brokers' legal rights.
MFDA vice-president Shaun Devlin said the regulation gives the MFDA the same powers as the OSC, with both organizations' rules citing the "public interest" to determine when a hearing can be held without notification.
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.