IIROC has developed risk-based methodologies to assess the financial condition and business conduct of member firms. This risk-based approach to regulation allows IIROC to re-allocate resources to firms that have a higher than average potential to cause risk to the public, thereby enhancing the quality of regulation while minimizing unnecessary regulatory burden on firms posing little or no risk.
Business Conduct, Financial Compliance and Trade Conduct Compliance use risk assessment models to assign risk scores to firms and track the performance, in terms of compliance, of each firm and group of firms involved in similar lines of business (see peer groups, and the industry as a whole. ComSet, the Complaints and Settlements Database of the Enforcement Department, is used to track trends at each level.
Individual firms are provided with Risk Trend Reports outlining their risk assessment and their performance compared to their peer group and the industry. IIROC staff use the risk assessments to focus resources on firms that score higher compared to others, and encourage those firms to improve their compliance performance.
It is important to note that a firm with a higher than average risk score does not necessarily pose an actual or current threat to the public or that the firm is in breach of any regulatory requirements. The risk-based methodologies used by IIROC’s compliance and enforcement staff compare the relative risk of IIROC-regulated firms and were developed to identify and address potential problems before they have an impact on investors.