NDP MPP Michael Prue (Beaches-East York) today called on the province to separate the trade association and enforcement responsibilities of self-regulating organizations (SROs) in the financial industry.

This comes as the Investment Dealers Association (IDA), which represents securities dealers, launches an investigation into its members’ role in the frozen asset-backed commercial paper crisis.

“How can an organization be both an advocacy group and at the same time investigate its members’ potential wrongdoing? It’s a clear conflict of interest. Surely this is the role of the Ontario Securities Commission,” said Prue, the Ontario NDP’s Finance Critic.

“The fact that Canada’s largest security regulator is relying upon the IDA to conduct an investigation of this magnitude speaks to the serious problems with Ontario securities legislation and the OSC’s structure,” he added.

In 2004, an all-party Standing Committee on Finance and Economic Affairs unanimously made 14 recommendations on the Securities Act. One of them was to establish a task force to review potential conflict of interest in the financial sector SROs. Another was to separate the adjudicative and investigative functions of the OSC.

Early last week, Prue asked Finance Minister Dwight Duncan in Question Period why four years have passed without action on the committee’s recommendations. Duncan provided little in the way of an answer.

“The McGuinty Liberal inaction on these recommendations should concern all Ontarians. When push comes to shove, the current system means that retail investors usually get the short end of the stick,” said Prue.

As well as supporting the separation of the adjudicative and investigative functions of the OSC, the NDP also supports a stronger prosecutorial role in Securities Law cases for the Attorney General.