Some findings based on my twenty years in the Canadian Financial Services Industry.
Executive Summary:
1. Bank and Investment Industry rules get followed disparately, selectively and haphazardly, depending upon whether the rule is in the industry interest or in the public interest.
2. Self-regulation allows the industry to be self-arresting, self-judging, and self-punishing, and has resulted in the selfish interests of the industry to abuse the public interest and the public trust.
3. Industry, “codes of silence”, written or unwritten, allow indiscretions to remain hidden or covered up.
4. Abuse, fraud and inappropriate financial treatment of clients are also covered up with cash settlements rather than disclosed, discussed, deterred.
5. Until industry interests, people and players are separated from the role of industry referees, the game will always be stacked against the public interest, and trust in our financial services industry will continue to decline.
6. The industry is allowed to act like a bully, or to live up to the "wild west", comments of one Bank of Canada governor due to the sheer size they possess, the strength, and the freedom to make and enforce their own rules.

I have little faith in the process until it is built on a more sound foundation. To quote but one self appointed self regulatory industry association, “ The Mutual Fund Dealers Association of Canada is the self-regulatory organization for Canadian mutual fund dealers. The MFDA regulates the operations, standards of practice and business conduct of its 183 members and their approximately 70,000 representatives with a mandate to protect investors and the public interest.”

When I read this two concepts jump out at me. One is that this is a self regulatory body, and two that it’s stated mandate is to protect investors and the public interest. In my opinion if we follow the money trail of how they were started, funded, and by whom, as well as the public track record of how well or how poorly investors and the public interest has been treated, I can make no other conclusion that this and similar self appointed, self regulatory organizations are flawed from foundation.
When legislation changes regarding who is allowed to guard the financial henhouse in Canada, and prevents those wealthy foxes from volunteering for the role or appointing themselves, I believe we will make some progress toward the public interest. Until then the personal nest eggs of Canada’s public are at risk of abuse by financial predators.

It would appear that of the thousands of rules the industry is subject to, most are likely to be unused for years, many are ignored, and some are pulled out to punish or be enforced only haphazardly or arbitrarily depending on the good or bad graces of the persons involved.

To be more exact, if the rule is intended to protect the public, and/or save them money, the rule is less likely to be enforced since ignoring violations of these rules are of benefit to firms and managers who are supposed to spot the violations (remember, we are “self regulating”). Much like having a referee on your own team, the calls are going to go your way more often. If the rule, however is to protect the industry or the firm, it is more likely to be enforced or even used in ways against employees who need bringing “into line”. It smacks of disparate treatment depending on who the rule is to benefit.


Larry Elford, CFP, CIM, FCSI, Associate Portfolio Manager (retired 2004)
521 Fairmont Blvd S
Lethbridge, Alberta
T1K 7G3