FAIR Canada was invited to participate in the International Organization of Securities Commissions (IOSCO) annual conference from October 7 to 9 in Basel, Switzerland. The conference was organized by IOSCO’s Technical Committee (TC). The TC is composed of the eighteen largest capital markets worldwide, including the US SEC and the UK FSA. Associate Director Ilana Singer represented FAIR Canada at the conference. A number of current issues impacting on retail investor and shareholder rights were discussed, including complex products and dark pools.
Ms. Singer was invited to participate in IOSCO’s Dialogue with Stakeholders. This was the first time that a non-institutional shareholder group was invited to attend the meeting. In the context of a discussion about suitability, Ms. Singer made a number of comments about ensuring that the advertising and marketing of structured products remains accurate and balanced. Meeting participants included representatives from the Managed Funds Association and the International Investment Funds Association. The experience at IOSCO’s Dialogue with Stakeholders provided FAIR Canada with a unique opportunity to participate internationally in the securities regulatory debate.
Key themes from the TC Conference that touched on retail investor and shareholder rights included:
a) Understanding Complex Products
FAIR Canada has encouraged Canadian regulators to require that disclosure, particularly about complex products, be fair and balanced and written in plain language. Investors can benefit from disclosure that is clear, streamlined, and user-friendly. At the IOSCO conference, presenters noted that regulators must step up and help investors understand the risks embedded in complex products. Institutional investors and investment banks need to fully understand the products they have sold or created, as well as potential risks to the investor. FAIR agrees that regulators and market participants must act together to ensure that investors understand the products they are buying, especially the risks associated with investing in complex and high-fee products.
b) Need for Political Will to Protect Investors
FAIR Canada has made submissions to Canadian securities regulators and governments urging them to step up and act decisively to protect investors. Participants at the IOSCO conference noted that a major culprit in the aftermath to the financial crisis has been the lack of political will to regulate market conduct. One example is the credit default swap market, which needs fundamental reform. FAIR Canada is continuing to advocate for securities commissions and governments to act in the interest of retail investors, particularly in the areas of complex and high-fee products, and compensation for victims of financial fraud.
c) Dark Pools and Market Transparency
FAIR Canada believes that retail investors should be treated fairly when trading on the stock exchange, and not disadvantaged by any lack of transparency. Mary Schapiro (Chair, US SEC) noted during her presentation that the SEC will be focusing on market structure issues and dark pools. Ms. Schapiro’s goal, as Chairman of the SEC, is to increase transparency in the markets because investors need the confidence to return to investing in securities markets. FAIR Canada agrees with the concerns raised by Ms. Schapiro, and notes that dark pools may raise serious investor protection concerns in Canada as well as the U.S. FAIR Canada will be commenting on the recently published CSA-IIROC consultation paper entitled “Dark Pools, Dark Orders, and Other Developments on Market Structure in Canada”.
