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Canadian Securities Regulatory Monitor News and Insight

Category Archives: Broker-Dealers

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Targeted Reforms Update – Most regulators abandon the “Best Interest Standard” but propose to proceed with refined “Targeted Reforms”

Posted in Advisors, Amendments, Broker-Dealers, Compliance and Supervision, CSA, IIROC, Industry News, MFDA, OSC, Registrants

The Canadian Securities Administrators (CSA) issued CSA Staff Notice 33-319 (the Notice) to provide an update on the “Best Interest Standard” and “Targeted Reforms” proposed last year in an important CSA Consultation Paper that we discussed in a previous post.

Most regulators have decided to abandon the Best Interest Standard which would have introduced a “client best interest” standard against which all registrant-client obligations would be interpreted.

The CSA will still proceed with a refined set of Targeted Reforms. Even in the absence of a Best Interest Standard in most jurisdictions, the Targeted Reforms would nonetheless … Continue Reading

IIROC issues cybersecurity report cards to dealer firms

Posted in Broker-Dealers, CSA, IIROC

IIROC is providing all dealer member firms it regulates (Firms) with a confidential cybersecurity “report card” that will include:

  • an individual assessment of the Firm’s cybersecurity preparedness program
  • a comparison of the Firm’s cybersecurity practices against the industry and other Firms of similar size and business model
  • a list of cybersecurity areas to which the Firm should be giving priority attention.

The report cards were generated based on the results of an extensive assessment survey that Firms completed in June 2016. The survey responses were benchmarked against a National Institute of Standards and Technology cybersecurity framework that … Continue Reading

CSA Sets Out Priorities for 2016-2019

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Continuous and Timely Disclosure, CSA, Enforcement, Exempt Market Dealers, Investment Funds, Mutual Funds, Registrants

The Canadian Securities Administrators (CSA) published on July 7, 2016 their priorities for the three-year period 2016 to 2019 under four categories: “Enhanced Investor Protection”, “Fair and Efficient Markets and Reduction of Risks to Market Integrity”, “Enhancement of Enforcement Effectiveness” and “Enhancement of Information Technology”.

The CSA states its strategic objectives without once mentioning the possible impact on it of the proposed national Cooperative Capital Markets Regulatory Authority (CCMRA) some of its members support. On July 22, it was announced that the CCMRA is expected to be operational in 2018.

Enhanced Investor Protection

The CSA proposes to … Continue Reading

Les propositions des ACVM concernant les personnes inscrites ont des effets très importants sur les courtiers et les conseillers au Canada

Posted in Advisors, Amendments, Broker-Dealers, Compliance and Supervision, CSA, IIROC, Industry News, MFDA, Registrants, Requests for Comment

Les Autorités canadiennes en valeurs mobilières (les ACVM) ont publié un important document de consultation dans lequel il est proposé de rehausser considérablement les obligations de tous les conseillers, courtiers et représentants, y compris les membres de l’OCRCVM et de l’ACFM (les personnes inscrites). Les commentaires sur ce document de consultation peuvent être présentés jusqu’au 26 août.… Continue Reading

CSA Registrant Proposals Have Far-Reaching Effects on Dealers and Advisers in Canada

Posted in Advisors, Amendments, Broker-Dealers, Compliance and Supervision, CSA, IIROC, Industry News, MFDA, Registrants, Requests for Comment

Recently, the Canadian Securities Administrators (CSA) released an important Consultation Paper that proposes to significantly increase the obligations of all advisers, dealers and representatives, including IIROC and MFDA members (Registrants). Comments on the Consultation Paper can be made until August 26.

The CSA is proposing two distinct categories of changes that, if adopted, will significantly impact the economics of existing Registrant business models and Registrant compliance costs:

1. Best Interest Standard: A “client best interest” standard against which all Registrant-client obligations would be interpreted.

2. “Targeted Reforms”: A comprehensive set of so-called “targeted reforms” will affect … Continue Reading

OSC Sets Out Priorities for 2016-2017

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Enforcement, Exempt Market Dealers, Mutual Funds, OSC, Registrants

The Ontario Securities Commission (OSC) released its draft Statement of Priorities for 2016-2017. The comment period ends May 9th.

Investor Protection Priorities

Advance Best Interest Standard – The OSC will recommend and conduct consultations on regulatory provisions to create a “best interest” standard for advisors. This standard is controversial for some industry participants but the OSC is committed to it. The OSC will also  continue to focus on advisor compensation practices and identify those that are inconsistent with a “best interest” standard.

Compensation Arrangements in Mutual Funds – The OSC will regulate embedded commissions and … Continue Reading

IIROC Announces Dealer Sweep on Compensation-Related Conflicts

Posted in Broker-Dealers, Compliance and Supervision, CSA, IIROC, Industry News, Marketplaces, Registrants, Uncategorized

On April 6, IIROC published Notice 16-0068 – Managing Conflicts in the Best Interest of the Client (the 2016 IIROC Notice). IIROC intends to strengthen compliance by Dealer Members (DMs) with IIROC’s conflicts of interest rules, with a particular focus on the management of compensation-related conflicts.

Specifically, IIROC announced that it will take the following actions:

  1. Immediately enhance its compliance test procedures to more closely examine compensation grids, supervisory oversight of advisors recommending products with high commissions, and the monitoring of advisors approaching compensation thresholds;
  2. By June 2016, conduct a comprehensive survey to gather more detailed information
Continue Reading

IIROC 2016 Compliance Priorities

Posted in Broker-Dealers, Compliance and Supervision, IIROC, Registrants

The Investment Industry Regulatory Organization of Canada (“IIROC”) is Canada’s self-regulatory organization that overseas investment dealers and equity market places. In its 2016 statement of key compliance priorities, IIROC sets out its ongoing efforts to strengthen the culture of compliance among dealer members (“DMs”).

As in prior years, IIROC’s focus will be on taking action against DMs that fail to address significant compliance findings and/or fail to demonstrate a commitment to the development of a strong compliance culture. In addition, IIROC will, through its new Consolidated Enforcement Rules (expected to come into force in 2016), have the ability to … Continue Reading

CSA Proposals Require Enhanced Corporate Debt Trade Reporting and Transparency by 2017

Posted in Broker-Dealers, Continuous and Timely Disclosure, CSA, Exempt Market Dealers, IIROC, Industry News, Marketplaces, OSC, Proposals, Requests for Comment

Last week, the Canadian Securities Administrators (CSA) published for comment Proposals that would require trade information for all corporate debt securities executed by dealers to be made publicly available, subject to delayed dissemination and volume caps, by the end of 2017. The CSA Proposals aim to enhance the regulation and transparency of the Canadian fixed income market, partly in response to certain limitations highlighted in a Report on “The Canadian Fixed Income Market 2014” published earlier this year by the Ontario Securities Commission which suggested that retail investors in corporate fixed income securities have less access to … Continue Reading

IIROC Survey Shows Diverse “Best Execution” Practices

Posted in Broker-Dealers, Compliance and Supervision, IIROC, Industry News, Marketplaces

Recently, the Investment Industry Regulatory Organization of Canada (IIROC) released the results of a best execution survey it conducted of all its dealer members that execute secondary market trades in listed securities. There is great variability in the best execution practices followed by participants. In this post we comment on some of the survey results.

Compliance and Supervision Practices

Compliance Procedures

Nearly three quarters of respondents have procedures specifically in place to supervise compliance with best execution. Only two thirds of the participants that are members of some marketplaces and always use an executing participant to enter orders … Continue Reading

Liability of Compliance and Legal Personnel at U.S. Broker-Dealers for Failure to Supervise

Posted in Broker-Dealers, Compliance and Supervision, Enforcement, SEC

The SEC’s Division of Trading and Markets has recently issued guidance on the liability of compliance and legal personnel at broker-dealers under sections 15(b)(4) and (6) (the “failure to supervise” sections) of the U.S. Securities Exchange Act of 1934 (the Act).

Under the Act, the SEC may institute proceedings against a broker-dealer “supervisor” of business line personnel if someone under that person’s supervision violates securities laws and the supervisor failed reasonably to supervise that person with a view to preventing the particular violation. … Continue Reading

CSA Issues Guidance on Relationship Disclosure Practices for Portfolio Managers and Exempt Market Dealers

Posted in Broker-Dealers, Compliance and Supervision, Continuous and Timely Disclosure, CSA, Investment Funds, Portfolio Managers

Last week, the CSA published Staff Notice 31-334 – CSA Review of Relationship Disclosure Practices. The notice summarizes findings of a recent CSA compliance review of registered portfolio managers (PMs) and exempt market dealers (EMDs) and provides guidance on relationship disclosure information (RDI) practices.… Continue Reading

Fiduciary Duty for Dealers: Upcoming CSA Panel Discussion

Posted in Advisors, Broker-Dealers, Compliance and Supervision, CSA

The CSA announced on Monday the discussion topics for its panel session on July 23, 2013 from 10:00 a.m. to 12:00 p.m. on the 22nd floor of the OSC’s offices, located at 20 Queen Street West, Toronto, Ontario. The session will be moderated by James E.A. Turner, Vice-Chair of the OSC.

The panel discussion will focus on the following two topics:

  1. Should dealers (and their representatives) be subject to a best interest standard when providing advice to retail clients? What would the consequences be of introducing such a standard?
  2. What other policy options could securities regulators consider in addition, or
Continue Reading

IIROC Guidance Distinguishes Compliance From Supervision

Posted in Broker-Dealers, Compliance and Supervision, Enforcement, IIROC

In the wake of a disciplinary panel’s reasons given in 2012 in Re Northern Securities (Northern Securities),[1] the Investment Industry Regulatory Organization of Canada (IIROC) has issued fresh guidance on the compliance and supervision responsibilities of IIROC-regulated personnel.

According to IIROC Notice 12-0379 (Notice) issued in mid-December, 2012, compliance is not to be viewed as an isolated activity, but rather as the collective responsibility of the Ultimate Designated Person (UDP), Chief Compliance Officer (CCO), Chief Financial Officer (CFO), as well as executives, directors, management and supervisors of IIROC-regulated firms (Dealer Members). The authority and responsibilities of these parties are … Continue Reading

New Rules Proposed for Direct Electronic Linkages to Exchanges and Other Marketplaces

Posted in Broker-Dealers, CSA, Exempt Market Dealers, Marketplaces, Portfolio Managers, Proposals

Under Canadian securities law, registered dealers are intended to intermediate orders between customers and marketplaces. Sophisticated marketplace participants maintain a variety of relationships with brokers, some of whom are expected to provide order-routing services rather than advice. These sophisticated participants generate large volumes of orders to buy and sell securities and are concerned with limiting costs and delays in conveying orders to organized marketplaces. Accordingly, accessing marketplaces by direct electronic access (DEA) allows sophisticated marketplace participants, such as institutional traders, to effect their complex trading strategies more efficiently.… Continue Reading

Canadian Regulators Mull Fiduciary Standard for Advisers and Dealers

Posted in Advisors, Broker-Dealers, Continuous and Timely Disclosure, CSA, Requests for Comment, Scholarship Plans

Introduction – A Matter of Investor Protection

The Canadian Securities Administrators (CSA) recently published Consultation Paper 33-403 (Paper) which invites comment on whether a statutory fiduciary duty should apply to registered advisers and dealers (collectively, Advisers). The comment period ends February 22, 2013.

Though undecided on the regulatory course ahead, the CSA appears to be amenable to the introduction of a qualified statutory fiduciary duty for Advisers.… Continue Reading

The CSA and the IIROC Unveil Rules for Dark Marketplaces

Posted in Broker-Dealers, CSA, IIROC, Marketplaces

Canada has marketplaces, both “lit” and “dark”, where equity securities are traded. Lit marketplaces, such as TSX and Chi-X, generally display orders to market participants before trades occur, but offer some order types and practices that deviate from the display principle. For example, traders on lit markets can elect to keep a portion of an order dark by entering an “iceberg order.”… Continue Reading

Canadian Securities Regulatory Requirements Applicable to Non-Resident Broker-Dealers, Advisers and Investment Fund Managers

Posted in Advisors, Broker-Dealers, CSA, Enforcement, Exempt Market Dealers, Investment Funds, Portfolio Managers, Registrants, Registration

The purpose of this paper is to provide a non-resident of Canada with an overview of the dealer registration, adviser registration, investment fund manager registration and prospectus requirements that should be considered and addressed by the non-resident before it begins to trade securities with, or provide investment advice to, any person or company located in Canada, or to act as an investment fund manager in Canada. All currency amounts that are referred to in this paper are denominated in Canadian dollars.

The Canadian Securities Regulatory Framework

Like the United States, Canada has a federal system of government whereby the authority … Continue Reading