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Canadian Securities Regulatory Monitor News and Insight

Category Archives: IIROC

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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

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

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

Why Securities Regulators Can’t Collect Monetary Sanctions, and What They Plan To Do About It

Posted in AMF, CSA, Enforcement, IIROC, Litigation, OSC, Uncategorized

Securities regulators across Canada impose significant monetary sanctions against market participants each year. The CSA recently reported that provincial securities regulators collectively imposed $138.3 million in fines and administrative penalties and $111.7 million in restitution, compensation and disgorgement orders in 2015.[1] This was an increase of 102% from the previous year and the highest amount of monetary sanctions imposed since 2009.

At the same time that regulators are imposing increasing monetary sanctions, they are facing an increasing inability to actually collect these sanctions. For example, the British Columbia Securities Commission has collected less than 5% of monetary sanctions imposed … Continue Reading

CSA 2015 Enforcement Report Reveals Increased Regulatory Activity and Significantly Higher Monetary Sanctions

Posted in CSA, Enforcement, IIROC, MFDA, OSC

On February 23, 2016, the Canadian Securities Administrators (CSA) released its annual report on the enforcement activities of its members. Enforcement and pre-enforcement activity has increased significantly in 2015. Monetary sanctions imposed by regulators more than doubled year-over-year and regulators concluded 38% more cases in 2015 even as the number of new proceedings increased slightly.

The 2015 Results

Monetary sanctions doubled: The regulators collectively imposed the highest amount of monetary sanctions on market participants since 2009, the year their investigation into the crash of the asset-backed commercial paper market was settled. In 2015, regulators imposed $138.3 … 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

The OSC Overturns IIROC Panel’s Decision with Harsher Sanctions

Posted in Enforcement, IIROC, OSC

The Ontario Securities Commission (OSC) recently imposed harsher sanctions than were ordered by a panel of Investment Industry Regulatory Organization of Canada (IIROC) following a contested proceeding. The OSC’s decision has important implications in enforcement proceedings before IIROC.

The IIROC Decision (no suspension)

After a contested hearing, an IIROC Panel determined that Lucy Lukic, a registrant at an IIROC member firm, recommended off-the-book investments to her clients.[1] Lukic had recommended securities in an investment fund that was owned and promoted by her husband, a fact that was disclosed to her clients. However, the securities were sold without a prospectus … Continue Reading

Le glossaire

Posted in Advisors, Compliance and Supervision, Conformité et supervision, Conseillers en placement, IIROC, OCRCVM

De plus en plus, les clients ont des attentes marquées et précises à l’égard de leur conseiller.

Entre autres, on s’attend du conseiller qu’il soit professionnel, compétent et qu’il respecte les plus hautes normes d’éthique.

L’OCRCVM, en mettant de l’avant le modèle de relation client-conseiller, a tracé la voie sur l’importance et la priorité du client, la transparence dont doivent faire preuve les firmes et la divulgation claire des conflits d’intérêts.

On constate également que depuis plusieurs années, les produits et services financiers sont nombreux. Certains produits sont opaques et leur structure complexe. Un client peut facilement s’y perdre ou … Continue Reading

IIROC’s New Policy Regarding Personal Information in Disciplinary Proceedings Takes Effect on May 1, 2015

Posted in Compliance and Supervision, Conformité et supervision, IIROC

The policy provides guidance relative to the use and disclosure of personal information in proceedings brought pursuant to Rule 20 of the IIROC Dealer Member Rules and Part 10 of the Universal Market Integrity Rules (UMIR). This policy will replace IIROC’s “Policy on Requests for Access to Disciplinary Hearing and Settlement Hearing Records”.

New Requirements

The new policy requires the redaction of specific personal information that is enumerated in the policy from documents filed with the National Hearing Coordinator or with an IIROC Hearing Panel. The policy also limits public access to the hearing record to the redacted record.

The … Continue Reading

Ce qu’implique un règlement – 2ème partie

Posted in Compliance and Supervision, Conformité et supervision, Enforcement, IIROC, Litige en valeurs mobilières, OCRCVM, Securities Litigation, Uncategorized

Vous êtes aux prises avec une plainte disciplinaire d’un organisme d’autoréglementation, plus particulièrement l’Organisme canadien de règlementation du commerce des valeurs mobilières (OCRCVM). Vous êtes à regarder vos options dont, entre autres, celle de procéder à un règlement avec l’OCRCVM.

Lors d’un premier article nous avons traité du processus de fonctionnement du règlement. Nous avons également vu qu’il n’était pas possible de régler une faute ou un manquement.

Alors quel est l’avantage d’une entente de règlement?

L’avantage du règlement est d’abord d’éviter la tenue d’une audition devant une formation d’instruction, laquelle déterminera dans un premier temps s’il y a culpabilité … Continue Reading

Ce qu’implique un réglement

Posted in Compliance and Supervision, Conformité et supervision, Enforcement, IIROC, Litige en valeurs mobilières, OCRCVM, Securities Litigation, Uncategorized

Vous êtes aux prises avec une plainte disciplinaire d’un organisme d’autoréglementation (« OAR »), plus particulièrement de l’Organisme canadien de réglementation du commerce des valeurs mobilières (« OCRCVM »). Vous êtes à regarder vos options dont, entre autres, celle de procéder à un règlement avec l’OCRCVM, de ladite plainte disciplinaire, cela soulève plusieurs questions :

  • Comment fonctionne le processus de règlement?
  • Peut-on régler sans reconnaître de faute?
  • Peut-on régler de façon confidentielle?

Dans ce premier article, nous allons répondre à ces trois questions. Dans un article subséquent, nous répondrons à d’autres questions qui peuvent être soulevées dans le cadre d’un … Continue Reading

La transparence*

Posted in IIROC, OCRCVM

L’industrie des valeurs mobilières est fortement réglementée. Les lois et la réglementation qui l’encadrent sont complexes et volumineuses.  Cependant, la législation sur les valeurs mobilières repose sur un principe fondamental : le principe de la transparence ou encore de la divulgation.

La transparence permet aux investisseurs d’avoir confiance dans les marchés boursiers puisqu’il y a symétrie de l’information.  Cette confiance des investisseurs contribue à créer des marchés efficients.  L’accès qu’a l’investisseur à l’information disponible et publique lui permet de prendre (formuler) une décision éclairée en regard de son investissement[1].

L’accès à l’information fait également en sorte que le … Continue Reading

OSC Second Guesses IIROC on Marc McQuillen Settlement Agreement and Northern Securities Penalties

Posted in Compliance and Supervision, Enforcement, IIROC, OSC

As we discussed in a previous post, the Ontario Securities Commission (OSC) rarely exercises its broad statutory discretion to interfere with and remake IIROC decisions. Last month, the OSC departed from this approach on two separate occasions.

First, in McQuillen, the OSC took the rare but not unprecedented step of setting aside as “manifestly unfair” a 2007 settlement agreement (the Agreement) between IIROC and Marc McQuillen (the Applicant). The OSC also ordered IIROC to expunge the Applicant’s related disciplinary record and to repay $25,000 in fines to the Applicant.

The Applicant entered into the … 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

Sued for complying with Ontario securities law? The scope of immunity clarified in “Sells v. Manulife”

Posted in Continuous and Timely Disclosure, IIROC, Industry News

A recent court decision provides guidance on a seldom litigated issue — when can an individual or company seek immunity from being sued for complying with Ontario securities law?

In Sells v. Manulife, Manulife sought the dismissal of a lawsuit commenced by two former investment advisors (the “IAs”) based on s. 141(2) of the Securities Act, which states:

Immunity of Commission and officers

141. (1) No action or other proceeding for damages shall be instituted against the Commission or any member thereof, or any employee or agent of the Commission for any act done in good faith in the … Continue Reading

OSC Shows Reluctance to Second Guess IIROC Panel in Northern Securities Decision

Posted in Compliance and Supervision, Enforcement, IIROC, OSC

Appeals to the Ontario Securities Commission from IIROC discipline panel decisions are relatively uncommon.  A decision released at the end of 2013 shows the heavy burdens faced by parties who initiate the hearing and review process at the OSC.

In Northern Securities Inc. et al[1], an IIROC member firm and certain of its officers appealed by way of hearing and review[2] the disciplinary decision of a three person hearing panel.  The OSC released reasons nine months after the OSC hearing.… Continue Reading

IIROC Issues Final Guidance on Stop Loss Orders

Posted in IIROC, Marketplaces

IIROC issued final guidance late last week on the use and management of stop loss orders. The guidance comes in the wake of certain anomalous trades last month which prompted IIROC to take regulatory action when automatic triggering of stop loss orders apparently resulted in pricing distortions of Inter Pipeline Fund stock.

A stop loss order is a standing order to sell a security when the price of that security reaches a certain minimum level. Stop loss orders are a method of risk management and are frequently handled by way of automated technology solutions.

IIROC regulated dealers have “best execution” … 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

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