To create a true “One Canadian Economy” the removal of impediments to growing capital markets should be a core priority in federal and provincial/territorial efforts to dismantle internal trade barriers and reconcile regulatory differences.

Canada’s patchwork of securities regulators is no secret. For decades, efforts to create a single national regulator have gone nowhere, despite constant calls for reform. In the meantime, the Canadian Securities Administrators (CSA) – a voluntary umbrella organization of 13 provincial and territorial regulators – works to harmonize rules in the interest of cost efficiency, market competitiveness, and consistent investor protection.

Another key aspect of this fragmentation is the overlap between the CSA and Canada’s self-regulatory organizations (SROs). An SRO is an industry body, funded by its members, that regulates those members under the oversight of the CSA. This arrangement has produced a patchwork of rules – both among the SROs themselves and between the SROs and the CSA.

But the patchwork is being stitched together, one seam at a time.

One such seam: the CSA stitched up the self-regulatory patchwork by merging two member-funded SROs – the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) – into a single body, the Canadian Investment Regulatory Organization (CIRO) in 2023. Both IIROC and MFDA had regulated firms and individuals selling mutual funds, so the merger has reduced duplication and eased inconsistencies.

Even after the merger, fragmentation and duplication remains between CIRO and the CSA. CIRO’s authority comes from provincial securities regulators; its rules reflect, but do not necessarily mirror, provincial legislation or national instruments. The CSA oversees CIRO, with the power to review or override its decisions. Meanwhile CIRO’s jurisdiction is limited to primarily investment and mutual fund dealers and their advisors. For them, both CIRO and the CSA share authority over registration, conduct, and compliance. The result: two masters, two systems, and plenty of inefficiency.

Another seam: registration. It’s a core regulatory responsibility and a logical place to start stitching the system together. Before firms or individuals can operate in Canada, they must register with the appropriate securities regulator, meeting eligibility requirements designed to ensure professional and ethical standards. Historically, registration authority was in patches – spread across provincial and territorial regulators as well as IIROC and MFDA (now CIRO) – forcing firms and advisors to navigate multiple processes to operate nationally.

Earlier this year, the CSA stitched up the patches by delegating registration functions for CIRO members to CIRO. Makes sense – it should cut regulatory duplication, create a harmonized national registration framework for at least firms and individuals, and make it easier, faster and cheaper for them to enter the market, helping to build a more vibrant financial marketplace.

The next seam? Tackling the overlap and duplication in conduct and compliance rules between the CSA and CIRO for CIRO dealers.

Instead comes a slip of the needle. The Registration, Inspection and Examination Division (RIE) of the Ontario Securities Commission (OSC) is responsible for the ongoing supervision of firms and individuals trading or advising on securities or commodity futures, but its mandate overlaps with CIRO. Following the delegation of registration functions to CIRO, the OSC’s RIE expanded its mandate to include direct examinations of CIRO firms, adding another layer to an already tangled system.

To protect investors, CIRO conducts a series of audits, examinations and investigations with reporting obligations to the CSA. The scope covers business conduct, financial compliance, trade desk compliance, complaint driven investigations and other risk-based thematic or targeted reviews. Common concerns include the frequency of these audits and reviews, and the high related compliance costs. In addition, CIRO rules and guidance, provincial laws, national instruments and CSA guidance may intertwine, slowing business processes and driving up costs. Smaller dealers often feel these burdens disproportionately.

The number of IIROC and MFDA dealers has declined over several years, driven in part by the regulatory environment and by industry consolidation through mergers and acquisitions. According to CIRO data, the number of investment dealers has dropped from 207 in 2023 to 158 as of June 2025. In 2008, the MFDA comprised of 159 mutual fund dealers, a number that dropped to 85 in 2022. According to CIRO data, there are now around 80 mutual fund dealers.

The formation of CIRO represented a shift towards a unified regulatory body, at least for dealers selling mutual funds, in turn meant to help market growth. Delegating registration responsibilities to CIRO for its members was another move toward greater coherence. However, the OSC’s decision to expand the RIE’s mandate to include direct examinations of CIRO firms raises questions about how far progress toward streamlined harmonization has truly gone. The good news is that a “slip of the needle” can be corrected to keep the stitches moving in the right direction.