IIROC is responsible for monitoring the compliance of its regulated firms and their registered employees with rules related to business conduct, financial operations and trading practices.
The industry compliance departments (Business Conduct, Financial & Operations, Trading Conduct) regularly examine all firms, conducting 250 to 300 on-site reviews each year. Each of these reviews tests the firm's activities against the
IIROC Dealer Member Rules, the
Universal Market Integrity Rules (UMIR) and securities legislation. During an exam, IIROC uses a risk-based approach, focusing on those aspects of a firm's business that present heightened regulatory risk as well as on certain core areas. IIROC then issues a report to the firm about their compliance, highlighting the areas that they need to improve or change.
Each compliance department maintains its own risk model, which acts as a risk management tool to help identify, define and assess risks for regulated firms compared to the industry as a whole and compared to a firm's peers. These models help staff determine the risk profile of each firm relative to each other and the priority focus in IIROC's compliance examination cycle. The models are also used to prepare a Risk Trend Report (RTR) for each individual firm which reflects areas of risk inherent in each firm's business model and how well firms manage their business based on supervisory controls and governance in place. The RTR is sent to firms with our recommendations on areas in which the firm should have priority focus to improve and reduce risk profile.
The three compliance groups also collaborate on their programs and activities in the interests of efficiency and effectiveness. Each year we issue a Compliance Priorities Report. This report helps firms determine areas of focus for their own compliance programs, supervisory oversight and internal controls.
Financial & Operations Compliance
The mandate of this department is to monitor the solvency of all dealer member's financial condition and business activities within prescribed capital and operational rules, including the safeguarding of customer assets in the event of a firm facing financial or operational distress that can lead to the insolvency of the firm. An industry insurance scheme – referred to as the Canadian Investor Protection Fund (CIPF) is in place to backstop customer loss of assets within certain prescribed coverage limits in the event of the insolvency of an IIROC dealer member.
Business Conduct Compliance
The mandate of this department is to monitor our dealer members for compliance with business conduct regulatory rules. We test that firms have implemented policies, procedures and controls to supervise their lines of business in compliance with applicable rules. We work with other IIROC departments to review new member applications and changes to business operations, including ownership changes. We also work closely with Member Regulation Policy on rulemaking and guidance and collaborate with our Enforcement department to investigate potential cases of wrongdoing.
Trading Conduct Compliance
The mandate of this department is to monitor our dealer members further to supervision of trading activities. We test that firms have implemented policies, procedures and controls to prevent and detect potential negative impacts to market integrity and to comply with applicable requirements. We work with other IIROC departments to review new member applications and changes to business operations, including ownership changes. We also work closely with Market Policy on rulemaking and guidance and collaborate with our Enforcement department to investigate potential cases of wrongdoing.