New Self-Regulatory Organization (SRO)

Board Director

Our Client

On August 3, 2021, the Canadian Securities Administrators (CSA) issued Position Paper 25-404 – New Self-Regulatory Organization Framework (CSA Position Paper) announcing that they would be implementing a new single enhanced self-regulatory organization (New SRO). The New SRO will consolidate the functions of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) by way of amalgamation that is expected to be completed by December 31, 2022. The CSA’s main objective is to support the development of a regulatory framework that has a clear public interest mandate and fosters fair and efficient capital markets. 

The New SRO is a public interest focused self-regulatory organization that will be recognized by and accountable to the CSA. It is intended to enhance investor protection and public confidence, to ensure fair and efficient market operations, accommodate innovation and continually adapt to evolving industry conditions. New governance standards are outlined to reinforce the New SRO’s commitment to the public interest. Further, the New SRO will create a more efficient and consistent regulatory structure for dealers while also providing easier and more cost-effective access to a broad range of investment products for investors. 

Consistent with the public interest, the New SRO will:

• Develop and deliver more consistent and efficient regulation
• Deliver strong investor protection
• Enhance governance, transparency, and accountability to all stakeholders in order to reflect the clear public interest mandate and foster confidence in the regulatory framework
• Improve the robustness of compliance and enforcement processes
• Provide improved access to a broad range of investment products to all investors 
• Be known as a trusted, respected, and valued partner by other regulatory organizations with which it interacts
• Be a leading-edge securities regulator 

In helping to create the New SRO, the CSA established a special joint committee (SJC) for the purpose of conducting the search for candidates to serve on the Board of this new organization. The SJC includes members of the boards of directors of both IIROC and the MFDA as well as independent members. The framework for the New SRO outlines requirements for the composition of the New SRO Board which will provide a governance structure that clearly emphasizes the public interest mandate of the New SRO. Specifically, the requirements include that:

• A majority of the New SRO’s directors be independent
• The Chair of the New SRO board be an independent director
• The roles of Chief Executive Officer (CEO) and Chair be occupied by separate persons
• The Governance/Nominating committee be composed entirely of independent directors
• The Chairs of other committees such as Audit, Human Resources, etc. be independent
• Governance best-practices be established such as the use of evergreen lists and development of board skills matrices needed for a balanced board

In this context, the SJC is seeking candidates for eight independent director positions, and aside from the CEO’s position as a voting member, six industry director positions on the New Board. Working closely with the CSA, this inaugural Board of Directors will shape the future of the regulatory landscape in the Canadian investment industry.   

The Role

The members of the Board of Directors have the duty to supervise the management of the business and affairs of the New SRO. The Board, directly and through its committees and the Chair of the Board, will provide direction to senior management, generally through the CEO, to pursue the New SRO’s objectives of serving Canadian investors in the public interest. The Board will seek to ensure sound management as well as ethical and legal corporate conduct by maintaining an appropriate system of corporate governance and internal controls.

Key accountabilities of members of the Board of Directors will include:

• Play an active and positive role in the direction of the organization, applying their own experience and background to the integration of the two existing entities (i.e., IIROC and MFDA), and the creation and evolution of the New SRO.
• Provide input on strategic issues facing the organization, especially in the context of an industry that is going through transformation.
• In working with the executive management team, to oversee the evolution and implementation of the New SRO’s future strategy, assessing its activities in the light of short and long-term industry conditions.
• Contribute to the quality of Board debate by providing appropriate challenge and intellectual analysis, representing the interests of all stakeholders, and keeping the focus on strategic issues and the purpose/mission of the New SRO.
• Provide external independent counsel, advice and support to the CEO and executive management team, acting as a mentor/coach where necessary, and encouraging them in their ongoing development and succession planning.
• Network with business and industry contacts, as required, remaining up to date on matters of corporate governance, and providing advice or guidance, as appropriate.

Overall, the Board’s purpose is to build the long-term value of the New SRO and to provide for the continuity and vitality of the organization by: (i) setting its foundational governance framework, (ii) selecting the CEO, (iii) monitoring the performance of both the organization and the CEO, (iv) overseeing the CEO’s management of the New SRO’s relationship with CSA, and (v) providing management with appropriate advice and feedback. Management is responsible for, and the Board will ensure that the New SRO operates in a legal and ethically responsible manner, adhering to its mission to serve the public interest.

At a future date, the Board may be involved in further industry changes as outlined in the CSA Position Paper. In Phase 2 of the evolution of the organization, the Board will consider whether it may be appropriate to incorporate other registration categories into the New SRO (e.g., Exempt Market Dealers, Portfolio Managers and Scholarship Plan Dealers, which are currently overseen directly by the statutory regulators.

Candidate Profile

Candidates for the New SRO Board must possess industry/professional experience and personal leadership characteristics suited to the responsibilities of an SRO. The Board needs to reflect broad diversity in terms of skills, geographic location, gender, and all other visible/invisible qualities and identities, reflective of the diverse people of Canada. Fluency in both of Canada’s official languages is an asset but not a requirement.

Additionally, each Board Director candidate will demonstrate:

• An understanding and commitment to the New SRO’s mission, vision, and values.
• The ability to engage stakeholder support.
• An ability to work collaboratively and respectfully with the Board and executive management.
• An ability and willingness to commit the necessary time to prepare for, attend, and conscientiously participate in Board and Committee meetings, the Annual General Meeting, and other events.
• A commitment to high ethical standards and behaviour.

Industry Directors will have held senior positions of responsibility in the capital markets and have knowledge and understanding of regulatory matters that affect investors.  Industry Directors need to have expertise in one or more of the following areas:

• Corporate Finance, Investment Banking, Mergers and Acquisitions.
• Wealth Management, Retail Brokerage, Mutual Fund Dealer.
• Finance, Accounting, Audit, Financial Reporting, Risk Management.
• Investment Management (Investment Funds, Portfolio Management, etc.).
• Capital Markets (Fixed Income, Equities, Derivatives).
• Legal and Compliance.
• Operations.
• Public Equity Markets and Trading.
• International Senior Management experience in any of above areas.

Independent Directors may come from a variety of business or other backgrounds including:

• Business or professional experience with demonstrated leadership/achievement.
• Academic experience including research, teaching.
• Administrative.
• Legal (Corporate, Securities, Commercial Law).
• Government or Public Service (public policy, regulatory, finance, consumer protection).
• Investor Advocacy.
• Digital/Information Technology.

Collective Functional Skills and Experience

In accordance with best governance practices, it is important that Board Directors have broad functional experience in a variety of skills and knowledge areas.  As a group, the Board must possess the following expertise:

• Prior Board Experience as a director of a corporation or government related or not-for-profit organization or comparable relevant education.
• Strategic/Business Planning Management.
• Securities Business/Capital Markets: able to provide credible provincial, national, or international perspectives on business, finance, capital market trends and/or regulatory developments.
• Digital/Information Technology Management: specific knowledge/experience in technologies relevant to public markets, capital markets, sales and trading, compliance.
• Financial Literacy: accounting/auditing standards, internal controls and procedures, analysis and evaluation of financial statements, financial ratios, and other indices.
• Legal or Regulatory, including knowledge of investor protection issues and regulatory mechanisms to protect investors
• Integration Oversight: experience overseeing the integration of complex organizations in a way that levers the skills and talents of both groups and brings the best of both organizations into a single new, cohesive, and inclusive entity
• Public Affairs or Stakeholder Communications related to financial or regulatory areas.
• Human Resources and Talent Management.

The New SRO Board of Directors will be representative of its stakeholders and constituents, while also maintaining a strong focus and approach to Diversity, Equity, and Inclusion.

Board Meetings

Board Directors are expected to rigorously prepare for, attend, and participate in all Board meetings and meetings of Board Committees on which they serve, and devote the time necessary to appropriately discharge their responsibilities. Each Board Director is expected to ensure that other commitments do not materially interfere with the member’s service as a director. The Committees will be established once the board has been established.   

Application deadline: February 15, 2022

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