Recently, the Investment Industry Regulatory Organization of Canada (IIROC) published its regulatory priorities for fiscal 2020 and a three-year strategic plan.

Key priorities include:

  • Protecting seniors and vulnerable investors - safe-harbour rule. A rule will be proposed that would give Dealers the ability to place a temporary hold on a client’s account where financial exploitation or diminished capacity is suspected.
  • Competency profiles. IIROC will start to develop competency profiles for individual registrants prescribing the knowledge and competencies required of each IIROC approval category. IIROC will seek stakeholder input and then publish draft profiles for public comment.
  • Debt transparency. The Canadian Securities Administrators (CSA) are proposing to expand IIROC’s mandate as the de facto regulator of the debt markets. Currently IIROC collects from Dealers certain information regarding transactions in corporate debt securities. The scope of IIROC’s debt transparency program would be expanded to apply to all dealers, marketplaces, interdealer bond brokers and certain banks, and would require reporting of both corporate debt and government debt transaction information.
  • Responding better to innovation and reducing regulatory burdens. IIROC recognizes that it needs to modernize its rules and approach to regulation to respond more quickly to changes driven by innovation. As a result, IIROC will:
    • Establish an Industry Transformation Working Group, made up of senior staff that will focus on reviewing IIROC rules.
    • Identify rules and guidance that create unnecessary regulatory and financial burden, or that unnecessarily limit Dealers’ ability to use technology. A specific short-term focus will be to modernize IIROC’s approach to supervision as described in more detail below.
    • Explore new IIROC membership categories to facilitate tailored oversight appropriate to current and developing models. An example under consideration is a new Marketplace membership category which would recognize the unique structure of Alternative Trading Systems (ATSs) regulated by IIROC and allow for new types of marketplace entrants.
  • Work on client-focused reforms and embedded commissions. IIROC will work with the CSA on next steps related to the client-focused reforms and embedded commissions projects. As discussed in our previous article, the reforms will affect a number of key processes, including conflicts of interest, know-your-client, suitability, and know-your-product requirements.
  • Derivatives rule framework and requirements. IIROC will modernize its derivatives rule framework to ensure that comparable standards apply when transacting in all types of securities and derivatives with clients.
  • Crypto trading. Continue to partner with the CSA to develop a regulatory framework for crypto trading platforms.
  • Continue to enhance IIROC’s surveillance system to support market supervision.
  • Use analytic capabilities (artificial intelligence, machine learning) and data that IIROC collects for regulatory purposes to improve effectiveness and predictive capabilities.
  • Plain Language Rule Book. Upon CSA approval, IIROC will implement the Plain Language Rule Book and related training for Dealers and staff.
  • IIROC will modernize how it supervises its members, and will modernize the supervisory requirements for members with respect to their registrants and their activities:
    • IIROC will assess its current requirements and determine what changes need to be made, starting with where technology is appropriate for Dealers to use in support of their supervisory activities. Following this review, IIROC will prioritize the changes required and begin the rule-making process.
    • IIROC will continue to enhance its compliance examination modules to ensure the examination focus is on key risk areas. IIROC recently redesigned its risk models.
  • Dealer report cards. IIROC will develop report cards for Dealers specific to market regulation compliance. These reports are intended to assist Dealers to comply with market rules and better understand their level of compliance relative to other Dealers.
  • New forms of disciplinary action. IIROC will approve and finalize two alternative forms of disciplinary action which we described in detail in a previous article.
  • Client identifiers. IIROC will begin the phased implementation of client identifier requirements.