IIROC staff create a Risk Trend Report (RTR) for every dealer member, reflecting both the financial condition, business conduct and trading conduct of that firm. Circulation of the RTR is restricted and it can only be accessed or used by the dealer member, the dealer member’s panel auditor and regulators.
The objective of the RTR is to encourage dealer members, particularly those with a high or deteriorating risk profile, to strengthen their governance and risk management practices.
The RTR identifies the key factors in the firm’s risk assessment, makes specific recommendations, if any, for dealer member action and provides comparisons of both its peer group and the industry as a whole. Each dealer member has been categorized into one of the nine peer groups as presented in the
List of IIROC Dealer Members by Peer Group.
The assessment is based on information available to Financial & Operations Compliance (FinOps) and Business Conduct Compliance (BCC).
IIROC typically gives each firm a Risk Trend Report –once every three years. Firms that are considered “high risk” will receive a report each year.
The Risk Trend Report gives each IIROC-regulated firm a risk score in each of three categories based on its financial condition, business conduct compliance track record, and trading conduct. The RTR benchmarks each firm’s individual risk score in each category against that of comparable firms so they can gauge their performance against competitors. This report is not a public document and is only accessible to the firm.
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Industry Compliance Performance
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.
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