FinOps’s Early Warning (EW) system measures the capital, profitability and liquidity position of Members to monitor their financial health. Material from a Dealer Member firm’s monthly and yearly reports is used to calculate the Dealer Member’s Risk Adjusted Capital (RAC). The EW system measures a Dealer Member’s RAC against certain arithmetical benchmark tests designed to detect the risk of insolvency. For example, FC staff determine the ratio of capital erosion, measured in months, by looking at the trend in reported losses relative to the remaining available capital of a firm.

If a Dealer Member fails any of the EW tests, or if a Dealer Member’s condition is unsatisfactory for any reason in the discretion of the Vice-President, Financial & Operations Compliance, the Dealer Member may be designated Early Warning Level 1 or Level 2, depending on the degree of risk. Rule 30 imposes standard restrictions on Dealer Members designated at each level. To place a firm in Early Warning does not indicate that the public is currently at risk. The restrictions allow IIROC to require the firm to pause and re-assess its business model, implement changes such as cost rationalization measures or recapitalize. IIROC will closely monitor the firm's ongoing financial results and determine whether the measures have a positive effect or there is need for additional regulatory intervention to prevent the firm from incurring a capital deficiency.

In the event that a firm actually becomes capital deficient, meaning its RAC drops below an acceptable level, it is given no more than 24-48 hours to remedy its RAC or face immediate suspension if there is any likelihood of financial loss to the public. Membership suspension notices are public information. All capital deficiencies are referred to Enforcement for possible disciplinary action. All clients of IIROC Dealer Member firms are covered by the Canadian Investor Protection Fund (CIPF), which protects clients in the event that a Dealer Member firm does become insolvent.