Effective Date: December 31, 2021
Each Dealer Member (Dealer) must have a Chief Financial Officer (CFO).1 Each CFO must also be approved as an Executive.2 As an Executive, the CFO must be actively engaged in the Dealer’s business.3 However, this does not need to be on a full-time basis, if appropriate for the Dealer’s business.4
A Dealer may employ a CFO on a part-time basis. The same individual may be approved by IIROC to perform the role of CFO for more than one Dealer.
This notice sets out our expectations regarding part-time CFOs5 .
Approval of a Chief Financial Officer
The IIROC Registration department reviews and evaluates every CFO application, and consults with the IIROC Financial and Operations Compliance department staff as required.
CFO applications are reviewed based on the “fit and proper” test.6 In the case of a part-time CFO applicant, we may review the number of Dealers the applicant works for and the circumstances of those Dealers. In doing so we may ask for additional supporting documentation.
The CFO role must align with the principles set out in this notice and encompass all of the obligations and functions of a CFO and an Executive. A part-time CFO’s employment terms must not prevent them from carrying out their role and responsibilities. IIROC staff may at any time request a copy of any employment or services contract relating to the CFO.
Chief Financial Officer duties and responsibilities
A CFO plays an important role in ensuring investor protection. CFO’s specific responsibilities are set out in section 3913:
- establish and maintain policies and procedures for the Dealer relating to financial IIROC requirements,
- monitor adherence to the Dealer’s policies and procedures to provide reasonable assurance that the Dealer complies with the financial IIROC requirements,
- identify any breaches of approved capital usage limits and report them in accordance with section 4116, and
- report to the Ultimate Designated Person as soon as possible if there is any indication that the Dealer or any individual acting on its behalf may be in non-compliance with the financial requirements of IIROC and: (a) the non-compliance creates a reasonable risk of harm to a client, (b) the non-compliance creates a reasonable risk of harm to the capital markets, or (c) the non-compliance is part of a pattern of non-compliance.
A CFO is responsible for the Dealer’s compliance with IIROC’s financial and operational rules. This includes:
- supervision of and responsibility for the overall accounting and regulatory financial reporting infrastructure of the Dealer, including monitoring of capital adequacy and early warning tests, free credit limits, insurance requirements and aging of unsegregated customer fully paid and excess margin security positions,
- final preparation, approval and responsibility for the accuracy of financial reports submitted to IIROC,
- supervision of individuals who assist in the preparation of these reports,
- supervision of and responsibility for individuals who are involved in the maintenance of the Dealer’s books and records from which these reports are derived, and
- supervision of outsourced functions relating to the CFO’s responsibilities.
A part-time CFO’s regulatory obligations are the same as those of a full-time CFO. The duties and responsibilities of the CFO still apply if the CFO works off-site or with multiple Dealers.
It is the responsibility of each Dealer and CFO to determine how much time the CFO should be working on-site (and, if applicable, at what intervals on-site work should be scheduled) in order to meet their regulatory obligations and the needs of the business. A CFO who routinely works with multiple Dealers must always be prepared to devote more time to a particular Dealer as needs and situations arise.
Whether regularly working on-site or not, the CFO would, among other supervisory responsibilities, participate in executive management meetings and inquire about and review relevant contracts, ongoing liabilities, future commitments and operational matters that may impact the Dealer’s balance sheet and capital position. Dealers must give any part-time CFO unrestricted access to their books and records.
The CFO must be apprised of all relevant commitments under consideration by the Dealer. This includes contracts under negotiation, corporate finance transactions in progress, etc. If the CFO works off-site, they are expected to be in regular communication with the Dealer, and remain current on management and financial matters.
A Dealer with a part-time CFO should continually evaluate the growth and development of the business and consider whether this continues to be appropriate for the scale and scope of their business activities.
Supervision, conflicts and confidentiality
Dealers must supervise their CFO’s activities. This applies even to part-time CFOs.
If a CFO works with multiple Dealers, each Dealer must actively manage conflicts of interest and preserve confidentiality. Dealers must implement appropriate policies and procedures to do so. The CFO must disclose to each Dealer the nature of his/her roles (in the context of the other Dealer’s business models, where relevant). For example, if a CFO works with one Dealer involved in corporate finance and another Dealer where the CFO holds an account, or sits on a research or portfolio committee, both Dealers must be aware of these roles to ensure appropriate controls are in place to manage conflicts and protect confidential information.
IIROC Rules this Guidance Note relates to:
- section 2505,
- clause 2602(3)(xxix), and
- section 3913.
Previous Guidance Notes
This Guidance Note replaces IIROC Rules Notice 14-0280 - Part Time Chief Financial Officers (December 1, 2014).
This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.
- 6IIROC Rule 2600. See also GN-9200-21-001.
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