This Notice summarizes the significant activities and initiatives that we will focus on in our 2021 fiscal year: April 2020 – March 2021 (FY21).
The significant transformation underway across the investment industry continues, driven by the changing needs and expectations of Canadians and the ways in which technological advances allow them to be met. Many of these changes have been accelerated by the COVID-19 pandemic, providing both challenges and opportunities for investors and those who serve them.
In light of the current environment of uncertainty related to the pandemic, and in addition to delivering on our core mandate of investor protection and market integrity, we have prioritized our focus on the following:
- effectively managing issues that arise from the COVID-19 pandemic, prioritizing the health and safety of our staff and stakeholders, investor protection and healthy capital markets
- advancing our various initiatives and commitments related to investor protection
- supporting industry transformation through the evolution of the self-regulatory model to more effectively and efficiently serve Canadians.
Effectively managing issues that arise from the COVID-19 pandemic, prioritizing the health and safety of our staff and stakeholders, investor protection and healthy capital markets.
Of paramount importance to IIROC is the well-being and safety of our employees, investors and all Canadian market participants. In March 2020, IIROC was able to transition very effectively and efficiently to working entirely from home, a model which continues today. IIROC, as a pan-Canadian regulator, remains fully operational as an essential service carrying out all core and critical regulatory responsibilities securely. This includes the front line surveillance oversight of equity and debt trading in Canada to ensure our markets operate in an orderly manner and with integrity.
We continue to monitor government and public health directives across jurisdictions and, as the situation develops, we will adapt our plans and issue further communication, where appropriate. For example, while we temporarily paused our compliance exam programs, on May 19, 2020, we restarted our reviews on a remote basis.
We will efficiently consider and grant, where appropriate and without compromising investor protection, certain types of exemptive relief for Dealer Members related to issues arising from the COVID-19 pandemic.
Similar to the approach taken by the Canadian Securities Administrators (CSA) and other regulators around the world, we will extend comment periods and implementation timelines where appropriate, keeping stakeholders informed.
As well, we will focus on identifying key learnings, both from IIROC’s perspective, as well as from the perspectives of investors and Dealer Members. It will be critically important to leverage our collective learnings from the pandemic to better support the industry in responding to changing investor needs.
Advancing our various initiatives and commitments related to investor protection
IIROC is undertaking a new initiative to consider how we can better support investors who suffer losses at the hands of wrongdoers. We will be exploring if there are ways to return to investors disgorged funds collected from an advisor or firm disciplined by IIROC. Disgorgement refers to any direct or indirect financial benefit obtained as a result of wrongdoing which may include profits, commissions, fees, compensation or any losses avoided.
IIROC will also review the practices of other jurisdictions. Once IIROC has completed its review, it will publish a proposal for input from stakeholders, including the CSA, as well as seeking any required CSA approvals.
Returning wrongdoers' ill-gotten gains to investors would be an additional layer to IIROC's existing investor protection efforts as today IIROC does not have the authority to return funds to harmed investors.
To further deliver on our investor protection mandate, IIROC will undertake research directly with complainants. Later this year, IIROC, with the assistance of an independent research firm, will interview individual complainants confidentially in order to improve its complaint handling process. IIROC will also use this opportunity to seek direct input from investors about the potential return of disgorged funds collected from individuals or firms disciplined by IIROC.
IIROC will continue our work with the CSA in support of a safe harbour rule and developing additional tools to help dealers protect vulnerable investors.
IIROC will also continue to seek additional authority to strengthen our enforcement toolkit so that investors in every Canadian province and territory have a consistent level of protection regardless of where they live. During the past fiscal year, New Brunswick and Saskatchewan joined seven other provinces and the three territories in strengthening IIROC’s ability to collect fines from sanctioned individuals among other enforcement tools.
Further to formally amending IIROC’s criteria to identify and nominate candidates for upcoming Independent Director positions on its Board to include direct experience with consumer and retail investor issues, we will also seek input related to our plan to establish an Expert Investor Issues Panel (EIIP). The EIIP will be a critical, additional layer to efforts already conducted by IIROC to gauge the public's views on regulatory initiatives and/or other public interest matters. The EIIP will enable individuals with a wide variety of experience and expertise related to investors to provide valuable input into IIROC's mandate to protect investors and support healthy capital markets.
We will continue to leverage the online pool of 10,000 Canadian investors we established to engage retail investors directly about their investment needs and views. Administered by an independent national research firm, these surveys help inform our policy-making and allow us to gauge investor understanding and awareness of key issues.
Supporting industry transformation through the evolution of the self-regulatory model to more effectively and efficiently serve Canadians
We will continue to respond to the significant transformation that has been taking place in the investment industry as firms adapt in order to deliver what Canadians want and need throughout their life stages. The regulatory ecosystem must continue to evolve so advisors and firms can deliver efficient and cost-effective financial advice and services to Canadians.
There is more work to do to address the feedback we received from our industry consultations with Accenture (see our report “Enabling the Evolution of Advice in Canada”). We will continue to identify and address rules that result in unnecessary process and cost, or that limit the appropriate use of technology. By modernizing our rules and our approach to regulation, we can help to reduce risks associated with innovation and make it easier for the industry to deliver the products and services that Canadians are looking for.
Some initiatives IIROC will be able to advance independently, while for others, we will need to move forward with our colleagues at the CSA, and we will continue to collaborate with provincial commissions on various initiatives including those related to financial planning and title protection.
CSA Consultation on Self-Regulation
An important development last year was the announcement in December 2019 by the CSA that it would undertake a review of the regulatory framework for the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). The CSA published their consultation paper in June 2020 for a four month comment period.
After extensive dialogue with investors, investment and mutual fund dealers and advisors, professional bodies and industry associations, IIROC developed and published its proposal “Improving Self-Regulation for Canadians” in June 2020. We are recommending the consolidation of IIROC and the Mutual Fund Dealers Association as a first step. Our proposal would not only enhance investor protection but would save hundreds of millions of dollars of duplicative regulatory costs over the next decade – money that investment firms could direct toward client service, innovation and economic growth, according to an assessment conducted in 2020 by an independent consulting firm. We believe our proposal could deliver real, tangible benefits to Canadians and to the industry within a year of approval from the CSA.
IIROC applauds the CSA for its leadership and will continue to participate in their consultations as they explore ways to modernize the regulatory system in Canada. By working together and staying current with how the industry and our capital markets are evolving we can achieve our shared goal: a structure that is more efficient, more effective and ultimately leads to better outcomes for Canadians.
We remain committed to our other initiatives and priorities which will continue to move ahead as planned, although some may progress at a slower pace. Notwithstanding the current challenging environment, we will continue to prioritize investor protection and market integrity. Other priorities include:
- adopting Client Focused Reform rule amendments in accordance with the extended CSA timelines
- progressing derivatives rule reform, specifically related to margin requirements
- conducting a study of failed trades of listed securities. This study will examine the length of time settlement failures remain outstanding and explore whether systemic issues exist
- publishing post-trade information for government debt securities, further to the CSA’s decision to expand IIROC’s role as Information Processor
- continuing the implementation of phases two and three of the client identifier requirements
- continuing to support the CSA on the development of a regulatory framework for crypto trading platforms
- evolving our HR and workplace strategies, including learnings from the pandemic.
Our priorities for FY21 support the objectives outlined in the three-year Strategic Plan we published in June 2019. IIROC’s Mission is to protect investors and support healthy Canadian capital markets. Our Vision, which represents our definition of long-term success, is to demonstrate how our self-regulatory model serves the public interest by:
- inspiring confidence and deterring wrongdoing by having and using robust and appropriate tools
- making the delivery of securities regulation in Canada significantly more efficient
- being known as a trusted, respected and valued partner by our stakeholders
- being a leading-edge regulator
- creating a culture that attracts and retains high-quality employees.
These priorities support the seven key strategies that enable us to deliver effectively on our mandate and our Mission and Vision:
- deliver value for Canadians and the financial system
- support industry transformation
- leverage data and analytics
- help firms with compliance
- strengthen enforcement
- drive efficiency and operational effectiveness
- attract, retain and enable skilled people.
As a conduct and prudential regulator, we will continue to take a risk-based approach to business conduct, trading conduct, and financial and operational reviews of IIROC-regulated firms to ensure they comply with statutory and IIROC requirements, and to encourage a strong culture of compliance. As a market regulator, we will continue to oversee both debt and equity trading in Canada to ensure the integrity of our capital markets. For more details of our compliance activities and priorities, see the IIROC 2020 Compliance Report: Helping Firms with Compliance.
Our Policy teams will continue to strive to deliver timely, relevant, comprehensible and proportionate regulation that minimizes undue impact. Our quarterly Policy Priorities publication is an important way we help Dealer Members investors and other stakeholders anticipate, plan for and/or comment on our current and upcoming policy initiatives.
In keeping with our oversight role, we will continue to investigate and enforce our rules and hold IIROC-regulated Dealers and individual registrants responsible for their actions through various disciplinary sanctions. For more details of our enforcement activities, see our 2019 Enforcement Report.
For more information on IIROC, please visit www.iiroc.ca.