Effective Date: December 31, 2021
The purpose of this Guidance Note is to advise Dealer Members (Dealers) of IIROC’s applicable requirements1 regarding non-securities business activities with particular reference to the distribution of insurance products by licensed agents.
- 1In this Guidance, all rule references are to the IIROC Rules unless otherwise specified.
Section 2215 of the IIROC Rules states:
- A Dealer Member must obtain approval from the applicable District Council before carrying on any business other than Dealer Member related activities.
- A Dealer Member or a Dealer Member’s holding company may, without approval, own an interest in a corporation (other than the Dealer Member) that carries on non-securities business if:
- the Dealer Member is not responsible for any of that corporation’s liabilities, and
- the Dealer Member and its holding company give IIROC notice before acquiring an interest in the non-securities corporation.
- A District Council may delegate its authority under this section to a subcommittee of the District Council or to IIROC staff.
IIROC staff considered whether to permit a Dealer to engage directly in the distribution of insurance products by its employees (licensed insurance agents), where permitted by provincial legislation and insurance regulators.
The following concerns have been identified:
- Dealers are unable to eliminate potential civil and other liabilities arising from the sale of insurance products and there is no provision for quantifying and providing capital for those risks as there is for risks arising in the course of Dealers’ securities business, and
- IIROC has no jurisdiction or authority over insurance business activity and is thus precluded from effective regulation of the distribution of insurance products by a Dealer to ensure that related risks are adequately controlled.
Based on the foregoing, IIROC staff have taken the position that it will not recommend any Dealer firm application to District Council to diversify business activities involving the distribution of insurance products by employing licensed insurance agents.2
IIROC Rules this Guidance Note relates to:
- Rule 2200.
Previous Guidance Note
This Guidance Note replaces MR0278 – Diversification – Distribution of Insurance Products.
This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.
- 2Dealers can custody insurance products and report them within account statements to clients.