Contact:
IIROC is proposing amendments (Proposed Amendments) to our:
The Proposed Amendments:
We are also republishing for comment proposed amendments to Rule 9500 (Proposed Rule 9500 Amendments) to eliminate restrictions on information IIROC can receive from its approved ombudsman service, the Ombudsman for Banking Services and Investments (OBSI). We originally published the Proposed Rule 9500 Amendments in Notice 19-0181.
How to Submit Comments
Comments on the Proposed Amendments should be made in writing and delivered by April 14, 2022 to:
Member Regulation Policy
Investment Industry Regulatory Organization of Canada
Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
[email protected]
Also, provide a copy to the Recognizing Regulators by forwarding a copy to:
Market Regulation
Ontario Securities Commission
Suite 1903, Box 55
20 Queen Street West
Toronto, Ontario M5H 3S8
e-mail: [email protected]
Commentators should be aware that a copy of their comment letter will be made publicly available on the IIROC website at www.iiroc.ca.
The Proposed Amendments are intended to:
The Proposed Amendments do not involve a rule that IIROC, Dealers or Approved Persons must comply with in order to be exempted from a requirement of securities legislation.
We continue to monitor developments with the Canadian Securities Administrators (CSA), other regulatory organizations, SROs and jurisdictions which may impact the Complaint Requirements, in particular:
Our current ComSet Reporting Requirements are generally prescriptive in nature. They include specific lists of matters that:
As a result, Dealers are not consistently reporting to us or conducting investigations on all matters where there is a risk of material harm to clients or the capital markets or where there is material non-compliance with IIROC requirements, securities laws or other applicable laws.
To address this issue, we propose to introduce a “serious misconduct” definition that is principles-based and is intended to consistently focus our ComSet Reporting Requirements on matters where there is:
In addition to introducing a materiality threshold, we are proposing the new term “serious misconduct” to:
In the new “serious misconduct” defined term, we propose to consolidate the activities listed in current section 3706 and subsection 3721(2)3 and two client-related activities from UMIR Rule 10.16(1)4 as examples of serious misconduct. Consequently, we propose to remove violations of the best execution of client order requirements and violations of client priority requirements from the list of matters that must be reported under UMIR 10.16(1).
Specifically, the activities we propose including as examples of “serious misconduct” are:
We consider each of these matters to be activities which create a reasonable risk of material harm to clients or the capital markets. As such, we would require Dealers to report them to us regardless of whether Dealers consider these activities to be material or not, with the exception of breaches of client personal information (which must be material to be reported).
While not specifically enumerated in the list of examples of “serious misconduct”, we consider engaging in manipulative or deceptive activities to constitute material non-compliance of our rules. Participants are required to report on this activity under UMIR 10.16. Unless they’ve already reported it under UMIR 10.16, all Dealer Members would need to report such activity if it meets the threshold of:
In Appendix 5, we list out these examples of misconduct and clarify which are included under the current ComSet Reporting Requirements, Complaint Requirements and Gatekeeper Obligations.
Under the Proposed Amendments, Dealers would have to conduct internal investigations and report to us if they become aware that the Dealer, an Approved Person or an employee may have engaged in serious misconduct, whether through a complaint or other means.
Under the expanded list of activities that constitute “serious misconduct”, Dealers would be required to report to us and conduct internal investigations on the following additional activities:
We are proposing these amendments to help Dealers quickly and consistently identify matters that must be reported or investigated. For those Dealers who are currently over-reporting or over-investigating, we anticipate these Proposed Amendments will have a positive impact. For others, this will likely mean an increase in reporting or investigation.
Currently, complaints alleging serious misconduct must be reported to an Executive. Under the expanded list of activities that constitute “serious misconduct”, Dealers would be required to add the following activities as reportable to an Executive:
Currently, Participants and Access Persons are subject to Gatekeeper Obligations in UMIR Rule 10.16.
Under the Proposed Amendments, the following two gatekeeper requirements in UMIR Rule 10.16(1) pertaining to Participants would be moved to Rule 3700 under the “serious misconduct” defined term:
As a result, with respect to violations of best execution or client priority:
We propose removing the definition of misrepresentation in subsection 3706(2) of the current IIROC Rules because it is duplicative of securities laws6 . Any term that is defined in securities laws has the same meaning in the IIROC Rules unless we specify otherwise.7
We propose an exception from the ComSet Reporting Requirement for any matters reported in accordance with the UMIR Rules 10.16 through 10.18. We are proposing this exception to reduce duplicative reporting by ensuring that Dealers and Approved Persons are not required to report the same matter under both the IIROC Rules and UMIR. As such, if a Dealer and an Approved Person report a matter as required by UMIR Rules 10.16, 10.17 or 10.18, they would not be required to also report that matter to us under the ComSet Report Requirements.
Question #1
Do you think this exception appropriately achieves our policy objective to reduce regulatory reporting? Why or why not?
The new “serious client-related misconduct” defined term captures all serious misconduct relating to the client’s account and any personal financial dealings with the client contrary to section 3115. As such it includes all the activities listed under “serious misconduct”, to the extent they related to a client’s account or to interactions with the client. We created this term to continue to focus our Complaint Requirements for retail clients on serious misconduct relating to the client or their account.
Under the Proposed Amendments, Dealers would have to meet certain Complaint Requirements for complaints alleging serious client-related misconduct. These Complaint Requirements include:
Under the proposed “serious client-related misconduct” term, Dealers would be subject to these Complaint Requirements for complaints that allege the following additional activities, to the extent that they relate to the client’s account or to interactions with the client:
We anticipate the impact of these Proposed Amendments to vary based on Dealers’ existing complaint practices. For some Dealers, these changes may result in an increase in the complaints they investigate and respond to. For other Dealers, there may be a more limited impact.
Our ComSet Reporting Requirements do not currently prescribe timing requirements for Dealers to report to us. Instead, Dealers have been referring to the reporting timelines set out in Member Regulation Notice 0162 (MR0162). Generally, the Proposed Amendments would codify the existing reporting timelines in MR0162. However, based on preliminary feedback we received, we propose to require Dealers to report the results of internal investigations to us within 20 business days, instead of the five business days in MR0162.
To assist in reviewing the Proposed Amendments, we included charts that illustrate the timing requirements for each reportable matter in Appendices 6 and 7.
Our existing ComSet Reporting Requirements apply only to matters involving Approved Persons. Under the Proposed Amendments, we extend some of our requirements to matters involving employees.
As such, Dealers would be required to establish and maintain policies and procedures8 that require an employee to report to them if they:
In addition, Dealers would be required to:
Employees would also be required to obtain their Dealer’s written consent before entering into a settlement agreement.
Under our current requirements, Dealers must report to us when their Approved Persons are subject to a criminal offence, civil claim, disciplinary action or denial of registration. This requirement assumes that the Approved Person has first reported these matters to their Dealer. In the Proposed Amendments, we are updating section 37029 to clarify that Approved Persons must first report these matters to their Dealer so the Dealer can address them and report them to us.10
Under clauses 3710(1)(v), 3710(2)(iv) and 3711(1)(iv) of the Proposed Amendment, Approved Persons and employees would be required to report to their Dealer, and the Dealer would be required to report to us, if they are subject to an investigation, to the extent they are permitted to do so by law or by the body conducting the investigation.
We propose a new requirement for Dealers to report to us any substantial compensation paid to a client. We expect Dealers will use their professional judgment in determining what substantial compensation means, considering the client’s circumstances and their Dealer’s business practices.
We clarified under sub-clause 3711(1)(iv)(b) of the Proposed Amendments that Dealers must report to us any time an Approved Person or the Dealer is the subject of any proceeding or disciplinary action alleging contravention of any applicable laws, not just securities laws.
We updated our civil action reporting requirement in sub-clause 3711(1)(iv)(e) of the Proposed Amendments to clarify that Dealers must report any civil claim or arbitration notice alleging serious misconduct.
We updated our internal disciplinary actions ComSet Reporting Requirements in clause 3711(1)(v) of the Proposed Amendments. We removed the dollar thresholds for reporting internal disciplinary actions, and instead require Dealers report to us any disciplinary action they take against an Approved Person involving allegations of serious misconduct.
While clause 3703(2)(i) requires Dealers report all client complaints to us, with the exception of service complaints, it does not require Dealers to report the outcomes of these complaints. We propose to clarify in subsection 3711(3) of the Proposed Amendments that Dealers would need to report the resolution of any client complaint alleging serious misconduct reported to us.
Likewise, we propose to clarify in subsection 3711(3) of the Proposed Amendments that Dealers would need to report the resolution of the following matters:
In subsection 3711(4), we propose to clarify that when a Dealer reports the results of an internal investigation to us, they should include a detailed description of the investigation and its results.
In MR0162 and IIROC Notice 11-0142, we outline the types of supporting documents we expect Dealers to provide to us for each type of reportable event. However, our ComSet Reporting Requirements currently do not reference supporting documentation. We propose clause 3804(2)(xx) to clarify that Dealers must provide additional documentation relating to the reportable matter to us upon request.
We also removed duplicative record keeping requirements and clarified our specific client complaint record keeping requirements.
We propose to clarify what we expect Dealers to maintain in their internal investigation records. Specifically, we expect them to maintain all documents and evidence collected, and document any recommendations made. We also clarified that Dealers must provide these records to us upon request.
We propose to clarify that Dealers must document and respond to each client complaint in a manner that a reasonable investor considers effective, fair and expeditious. This Proposed Amendment is consistent with our current requirement for Dealers to have policies and procedures to manage complaints effectively, fairly and expeditiously and with section 13.15 of National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations.
We propose to define the term “complaint” and remove the distinction between verbal and written complaints. Dealers would no longer be required to assess the merits of verbal complaints.
Consistent with our existing client complaint handling guidance11 , we propose to clarify that:
We propose to remove the requirement for Dealers to handle complaints in a balanced manner considering the interests of the client, Dealer, Approved Person and employee. We determined this was inconsistent with the Dealer’s and Approved Person’s obligation to put the client’s interests first when managing conflicts of interest12 , as this provision does not require Dealers to put the client’s interests ahead of their interests or their Approved Persons’ and employees’ interests.
Under the Proposed Amendments, when a Dealer determines that the number or severity of complaints is significant, or detects frequent and repetitive complaints which indicate a serious problem, they would have to, in addition to the existing requirements:
We propose this change to codify best practices and to ensure Dealers consider all clients impacted by a serious problem they have identified when deciding how to resolve it.
Consistent with client complaint handling best practices, we propose to require Dealers draft their acknowledgement and substantive response letters in plain language and provide them to the complainant in a format readily accessible and understandable by that complainant. For instance, if a complainant can only read Mandarin, and are serviced by their Dealer in Mandarin, the Dealer would have to respond to them in Mandarin.
We propose to update the information Dealers must disclose in their substantive response letters to client complaints. Specifically, under clause 3756(4)(v) of the Proposed Amendments, we clarify that clients may report suspected serious misconduct to us, and we will assess whether any disciplinary action is warranted.
We propose to allow a Dealer’s internal dispute resolution service a maximum of 90 days to respond to client complaints, consistent with the amount of time Dealers have to respond. Currently, there is no limit on how long a Dealer’s internal dispute resolution service can take to respond to a client complaint. We propose to limit this to a maximum of 90 days to ensure complaints are resolved more expeditiously, consistent with our proposed complaint handling standards.
We propose to clarify that Dealers must maintain the materials reviewed and obtained during a client complaint investigation in the client complaint file.
In IIROC Notice 17-0229, we highlighted certain concerns regarding Dealers’ complaint handling and listed acceptable practices for the communication of internal dispute resolution services and OBSI services to clients13 . We note that some of the issues raised in IIROC Notice 17-0229 continue to exist and so we propose to incorporate the acceptable practices for communicating internal dispute resolution services and OBSI services into section 3759 of the Proposed Amendments to codify our regulatory expectations.
In addition, we propose prohibiting the use of any misleading terms, including the term “ombudsman” or similar qualifiers, in referring to a Dealer’s or a Dealer’s affiliate’s internal dispute resolution service.
To support these changes, we created two new defined terms:
A detailed assessment of the impact of the Proposed Amendments has been prepared and is included as Appendix 8.
Overall, we believe that while there would be some negative impacts on Dealers, these impacts would be outweighed by the positive impacts the Proposed Amendments would have on investors, clients, Dealers, Participants and IIROC.
Rule 9500 sets out our requirements relating to a Dealer’s participation in the OBSI. Section 9504 requires Dealers provide OBSI with any information or records requested relating to an investigation or review. However, subsection 9504(3) generally prohibits OBSI from sharing such information with IIROC (Information Sharing Prohibition),14 except in limited circumstances15 .
For the reasons discussed below, we propose deleting subsection 9504(3) to:
We do not anticipate the Proposed Rule 9500 Amendments will significantly impact Dealers.
The OBSI Terms of Reference16 requires that OBSI “comply with a written request from a regulator for disclosure of information, documents, records or things”. As a result, our Information Sharing Prohibition is not consistent with the OBSI Terms of Reference.
Section 13.16 of National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations sets out the requirements by provincial and territorial securities regulators for participation by registered firms in OBSI. These requirements do not have a provision similar to our Information Sharing Prohibition. Therefore, provincial securities regulators do not face the same inconsistency between their information sharing rules and the OBSI Terms of Reference.
The MFDA had a provision similar to our Information Sharing Prohibition.17 However, to resolve its inconsistency with the OBSI Terms of Reference, in December 2019, the MFDA removed its provision prohibiting information sharing.18
We initially published the Proposed Rule 9500 Amendments for comment in IIROC Notice 19-0181. Most commenters were generally supportive of the Proposed Rule 9500 Amendments but some asked for more detail regarding:
While we currently obtain general information on client complaints from OBSI, the Proposed Rule 9500 Amendments would allow us to obtain Dealer-specific and client-specific information, on a case-by case basis. For example, we would know for which client complaints Dealers chose to compensate clients less that what the OBSI recommended.
We would use this information to improve our complaint information sharing with the MFDA and the CSA, conduct more holistic risk-based reviews of our Dealers, and inform our policy making and our enforcement investigations.19
As a technical matter, in order to include the Proposed Rule 9500 Amendments in this Notice and Request for Comment, we withdrew the amendment proposed under IIROC Notice 19-018120 . We included the Proposed Rule 9500 Amendments in this Notice so that our stakeholders could better understand how they would work together with the proposed amendments to our ComSet Reporting Requirements and our Complaint Requirement. For instance, we would use the client complaint information from ComSet in our work with the Joint Regulators Committee, which includes OBSI, the CSA and the MFDA, to identify and address industry-wide issues.
If approved, the Proposed Amendments and the Proposed Rule 9500 Amendments would be effective at least 6 months after we publish the Notice of Approval.
Question #2
Do you think 6 months would be an adequate amount of time for Dealers to implement the Proposed Amendments? If not, how much time do think Dealers would need?
We plan to issue updated guidance with the final version of the Proposed Amendments that addresses:
Question #3
Are there specific areas of the Proposed Amendments you would like further clarity on in the updated guidance? If so, please let us know which areas and why such clarity is needed.
IIROC’s Board of Directors (Board) has determined the Proposed Amendments and the Proposed Rule 9500 Amendments to be in the public interest and on November 24, 2021 approved them for public comment.
The Proposed Amendments arose from:
We consulted with the industry throughout the development of the Proposed Amendments and the Proposed Rule 9500 Amendments, including consultations with various Conduct, Compliance and Legal Advisory Section subcommittees. We took the public interest into account when developing the Proposed Amendments both through these consultations and by considering feedback we had received from investors.
After considering the comments received in response to this Request for Comments together with any comments of the CSA, IIROC may revise the applicable proposed amendments. If the revisions and comments received are not material, the Board has authorized the President to approve the revisions on behalf of IIROC and the proposed amendments as revised will be subject to approval by the CSA and implementation. If the revisions or comments are material, the proposed amendments including any revisions will be submitted to the Board for approval for republication or implementation as applicable.
Appendix 1 - Proposed amendments to IIROC Rules (clean)
Appendix 2 - Blackline of proposed amendments to IIROC Rules
Appendix 3 - Text of proposed UMIR amendments
Appendix 4 - Blackline of proposed UMIR amendments
Appendix 5 - Proposed serious misconduct definition chart
Appendix 6 - Approved Person reporting obligations
Appendix 7 - Dealer Member reporting obligations
Appendix 8 - Impact assessment
Appendix 1 – Proposed Amendments to IIROC Rules (clean)
RULE 1200 | DEFINITIONS
1201. Definitions
.
.
.
(2) The following terms have the meanings set out when used in the IIROC requirements:
.
.
.
|
“approved ombudsman service” |
An ombudsman service approved by the Board in accordance with subsection 9503(1). |
.
.
.
RULE 3700 | REPORTING AND HANDLING OF COMPLAINTS, INTERNAL INVESTIGATIONS AND OTHER REPORTABLE MATTERS
3701. Introduction
(1) Rule 3700 sets out Dealer Members’, Approved Persons’ and employees’ reporting, internal investigation and complaint handling and investigation requirements. Rule 3700 is divided into the following parts:
Part A – Reporting requirements
[sections 3710 through 3712]
Part B – Internal investigations and internal discipline
[sections 3720 through 3723]
Part C – Settlement agreements
[sections 3730 and 3731]
Part D – Client complaints – Institutional Clients
[section 3740]
Part E – Client complaints – Retail Clients
[sections 3750 through 3759]
Part F – Legal actions
[section 3760]
Part G – Specific record retention requirements for client complaints
[section 3770]
3702. Definitions
(1) The following terms have the meaning set out below when used in Rule 3700:
|
“complaint” |
Any oral or written expression of dissatisfaction with a current or former Dealer Member, Approved Person or employee. |
|
“cybersecurity incident” |
Any act to gain unauthorized access to, disrupt or misuse a Dealer Member’s information system, or information stored on such information system, that has resulted in, or has a reasonable likelihood of resulting in:
|
|
“internal dispute resolution service” |
An internal dispute resolution service offered by the Dealer Member, or an affiliate of the Dealer Member, to the Dealer Member’s clients. |
|
“serious client-related misconduct” |
Any serious misconduct relating to the client’s account or to interactions with the client. |
|
“serious misconduct” |
(i) Any activity which creates a reasonable risk of material harm to a client or the capital markets, including, but not limited to, any:
(ii) any other instance of material non-compliance with IIROC requirements, securities laws or any applicable laws. |
3703. – 3709. Reserved.
PART A – REPORTING REQUIREMENTS
3710. Reporting to the Dealer Member
3711. Reporting by a Dealer Member to IIROC
3712. Failure to report
3713 - 3719. Reserved.
PART B – INTERNAL INVESTIGATIONS AND INTERNAL DISCIPLINE
3720. Requirement to commence an internal investigation
3721. Records of an internal investigation
3722. Internal discipline
3723. Exception
3724 - 3729. Reserved.
PART C – SETTLEMENT AGREEMENTS
3730. Entering into settlement agreements
3731. Release
3732. – 3739. Reserved.
PART D – CLIENT COMPLAINTS – INSTITUTIONAL CLIENTS
3740. Complaint policies and procedures
3741. – 3749. Reserved.
PART E – CLIENT COMPLAINTS – RETAIL CLIENTS
3750. Retail client complaints
3751. Application
3752. Handling client complaints
3753. Complaint policies and procedures
3754. Disclosure of complaint handling procedures
3755. Complaint acknowledgement letter
3756. Response to client complaints
3757. Duty to assist in client complaint resolution
3758. Client complaint file
3759. Communication of internal dispute resolution service options
PART F – LEGAL ACTIONS
3760. Reporting legal actions
3761. – 3769. Reserved.
PART G – SPECIFIC RECORD RETENTION REQUIREMENTS FOR CLIENT COMPLAINTS
3770. Client complaints
3771. – 3799. Reserved.
RULE 3800 | DEALER MEMBER RECORDS AND CLIENT COMMUNICATIONS
.
.
.
3804. General requirements to maintain records
.
.
.
2. The records required under subsection 3804(1) include, but are not limited to, records that do the following:
RULE 9500 | ALTERNATIVE DISPUTE RESOLUTION
9501. Introduction
9502. Participation by a Dealer Member in arbitration
9503. Participation by a Dealer Member in an ombudsman service
9504. Dealer Members must provide information to ombudsman service
9505. – 9699. Reserved.
Appendix 3 – Proposed Amendments to UMIR (clean)
POLICY 1.2 - INTERPRETATION
[…]
Part 4 -Applicable Regulatory Standards
Rule 7.1 requires each Participant prior to the entry of an order on a marketplace to comply with applicable regulatory standards with respect to the review, acceptance and approval of orders. Each Participant that is a dealer must be a member of a self-regulatory entity. Each Participant will be subject to the by-laws, regulations and policies as adopted from time to time by the applicable self-regulatory entity. These requirements may include an obligation on the member to “use due diligence to learn and remain informed of the essential facts relative to every customer and to every order or account accepted.” While knowledge by a Participant of “essential facts” of every customer and order is necessary to determine the suitability of any investment for a client, such requirement is not limited to that single application. The exercise of due diligence to learn essential facts “relative to every customer and to every order” is a central component of:
In addition, securities legislation applicable in a jurisdiction may impose review standards on Participants respecting orders and accounts. The regulatory standards that may apply to a particular order may vary depending upon a number of circumstances including:
[…]
POLICY 7.1 – TRADING SUPERVISION OBLIGATIONS
Part 2 – Minimum Elements of a Supervision System
For the purposes of Rule 7.1, a supervision system consists of both policies and procedures aimed at preventing violations from occurring and compliance procedures aimed at detecting whether violations have occurred.
[…]
Regardless of the circumstances of the Participant, however, every Participant must:
[…]
6. Identify the steps the Participant will take when a violation or possible violation of a Requirement or any regulatory requirement has been identified. These steps shall include the procedure for the reporting of the violation or possible violation to the Market Regulator if required by Rule 10.16 or to IIROC if required by IIROC Rule 3700. If there has been a violation or possible violation of a Requirement, identify the steps that would be taken by the Participant to determine if:
[…]
UMIR 10.16 Gatekeeper Obligations of Directors, Officers and Employees of Participants and Access Persons
Appendix 5 – Proposed Serious Misconduct definition (section 3702(1))
|
Serious Misconduct Activity |
Current Requirements |
Proposed Amendments |
||
|---|---|---|---|---|
|
Required to be investigated and reported under the current ComSet Requirements21 ? |
Required to be reported under the current Gatekeeper Obligations22 ? |
Included in the “misconduct” term under the current Complaint Requirements23 ? |
Included in the “serious misconduct” term under the Proposed Amendments? |
|
|
material breach of client personal information under the Dealer Member’s control |
No |
No |
Yes24 |
Yes |
|
theft |
Yes |
No |
Yes |
Yes |
|
fraud |
Yes |
No |
Yes |
Yes |
|
misappropriation or misuse of funds or securities |
Yes |
No |
Yes |
Yes |
|
forgery |
Yes |
No |
Yes |
Yes |
|
money laundering |
Yes |
No |
No |
Yes |
|
insider trading |
Yes |
Yes |
No |
Yes |
|
misrepresentations |
Yes |
No |
Yes |
Yes |
|
unauthorized trading, including discretionary trading contrary to sub-section 3221(1) |
Yes |
No |
Yes |
Yes |
|
engaging in Dealer Member related activities outside the Dealer Member |
No |
No |
Yes |
Yes |
|
engaging in activities outside the Dealer Member contrary to section 2554 |
No |
No |
No |
Yes |
|
addressing conflicts of interest in a manner that is contrary to section 3111 or section 3112 |
No |
No |
No |
Yes |
|
engaging in personal financial dealings contrary to section 3115 |
No |
No |
Yes25 |
Yes |
|
violating the best execution of client order requirements in Part C of Rule 3100 |
No |
Yes |
No |
Yes |
|
violating the client priority requirements in section 3503 and UMIR Rule 5.3 |
No |
Yes |
No |
Yes |
|
violating the suitability determination obligation in Rule 3400 |
No |
No |
Yes26 |
Yes |
|
any instance of material non-compliance with IIROC requirements, securities laws or any applicable laws |
No |
No |
No |
Yes |
Appendix 6 – Reporting by an Approved Person or Employee to the Dealer Member (proposed subsections 3710(1) and 3710(2))
Under the Proposed Amendments:
|
Reportable Matters |
Description of Reportable Matters |
Earliest reporting time frame |
Latest reporting time frame |
|---|---|---|---|
|
Change in information |
a change in the Approved Person’s:
|
As soon as possible |
2 business days |
|
Serious misconduct |
instances of serious misconduct27 by the Approved Person or employee |
As soon as possible |
2 business days |
|
Client complaints |
client complaint about the Approved Persons or employee
|
As soon as possible |
2 business days |
|
Client complaints |
client complaint involving allegations of serious client-related misconduct about:
|
As soon as possible |
2 business days |
|
Legal or disciplinary actions, or denial of registration or license |
actions the Approved Person or employee is subject to and involving:28
|
As soon as possible |
2 business days |
Appendix 7 – Reporting by a Dealer Member to IIROC (proposed section 3711)
Under the Proposed Amendments, a Dealer Member would have to report the following matters to IIROC using ComSet within the amount of time set out below (subject to the exception in section 3723 of the Proposed Amendments).
|
Reportable Matters |
Description of Reportable Matters |
Earliest reporting time frame |
Latest reporting time frame |
|---|---|---|---|
|
Serious misconduct |
instances of serious misconduct31 by the Dealer Member |
As soon as possible |
5 business days |
|
Client compensations |
payment of a substantial client compensation by:
|
As soon as possible |
5 business days |
|
Internal investigation |
Dealer Member commences an internal investigation in accordance with section 3720 |
As soon as possible |
5 business days |
|
Legal or disciplinary actions, or denial of registration or license |
actions the Dealer Member, or a current or former Approved Person or employee, is subject to and involving:32
|
As soon as possible |
5 business days |
|
Resolutions |
the resolution of any legal or disciplinary actions or client complaints.33 |
As soon as possible |
5 business days |
|
Internal disciplinary actions |
internal disciplinary actions by a Dealer Member against an Approved Person or employee, involving allegations of serious misconduct, resulting from:
|
As soon as possible |
5 business days |
|
Client complaints |
client complaint involving allegations of serious client-related misconduct against:
while in the employ of the Dealer Member. |
As soon as possible |
20 business days |
|
Investigations results |
detailed description and results of any internal investigation involving serious misconduct activity |
As soon as possible |
20 business days |
|
Cybersecurity incident34
|
initial cybersecurity incident reporting35 |
As soon as possible |
3 calendar days |
|
Cybersecurity incident |
results of the investigation, resolution and lessons learned on the cybersecurity incident36 |
As soon as possible |
30 calendar days37 |
Appendix 8 – Impact Assessment
I. Impact Assessment Table
In the impact assessment table below, we list:
II. Conclusions
We concluded that, if approved, the Proposed Amendments would result in:
While there would be negative impacts on Dealers and Participants, we concluded these impacts were outweighed by the positive impacts the Proposed Amendments would have on investors, clients, Dealers, Participants and IIROC.
III. Cost Estimate
We do not know the dollar magnitude of the collective impacts of the Proposed Amendments and we cannot determine it without detailed stakeholder feedback. The stakeholders we did consult indicated that they would not be able to provide us with a cost estimate of the Proposed Amendments’ impacts without conducting a lengthy, detailed and costly analysis.
IV. Questions
Question #4
Have we identified all of the proposed provisions that will materially impact investors, clients, Dealers, Participants or IIROC? If not, please list any other proposed provisions that you believe will materially impact one or more parties and why.
Question #5
Overall, do you agree with IIROC’s qualitative assessment that the benefits of the Proposed Amendments are proportionate to their costs? Please provide reasons for your stance.
|
Description of proposed amendment |
Related intended benefits |
Impact on investors/clients |
Impact on Dealers/Participants |
Impact on IIROC |
|---|---|---|---|---|
|
ComSet Reporting Requirements |
||||
|
Introduction of a materiality threshold to the ComSet Reporting Requirements through the “serious misconduct” term, which also includes examples of what Dealers must report to us (taken from our current rules). |
Focuses on our reporting requirements on matters we care most about, namely matters where there is:
Increases consistency in what Dealers report to us. Maintains list of items Dealers are currently required to report to us, so we still get the same information from Dealers. |
Neutral to net positive – In most cases, investors will not be impacted. However, in certain cases, this reporting may prevent or address activities that could cause or have caused material harm to investors. |
Neutral to negative – Depending on their current reporting practices, for some Dealers, this may result in an increase in the information reported to us. In these cases, Dealers indicated this amendment could result in increased human resources costs, which they were unable to estimate.
For other Dealers, there may be a more limited impact.
|
Net positive – We will know each time a Dealer, one of their Approved Persons or one of their employees engages in serious misconduct. As such, we will be able to better:
|
|
Removing client-related reporting requirement from the Gatekeeper Obligations |
Reduces duplicative reporting for Dealers that are Participants, to the extent they are reporting these matters through both ComSet and Gatekeeper. They will report violations related to best execution and client priority through ComSet. Clarifies that where a Participant has reported matters required under UMIR 10.16, 10.17 and 10.18 (Gatekeeper Obligations) they will not need to make a duplicative report of the same activity through ComSet. |
Neutral – Investors will not be impacted by this change, as client-related matters will continue to be reported to us. |
Net positive – Dealers and Participants may experience a potential reduction in duplicative reporting, to the extent they are reporting these matters through both ComSet and Gatekeeper. Dealers and Participants have indicated that duplicative reporting is a regulatory burden that can increase costs – reducing such burden could decrease these costs. |
Neutral – We will be getting similar information from Dealers as we are today. For the most part, we would still be getting similar information from Participants. However, Participants will no longer be required to report any violation of:
by their related entities. We are currently not receiving many reports from Participants regarding their related entities’ activities, so there should be minimal impact on us. We will receive less duplicative information. |
|
Exception from the ComSet Reporting Requirements for matters reported under UMIR Rules 10.16, 10.17 and 10.18. |
Reduces duplicative reporting for Dealers and Participants, to the extent they were reporting these matters through both ComSet and Gatekeeper. |
Neutral – Investors will not be impacted by this change, as client-related matters will continue to be reported to us. |
Net positive – Dealers and Participants will experience a reduction in duplicative reporting, to the extent they are reporting these matters through both ComSet and Gatekeeper.
|
Neutral - We will be getting similar information from Dealers and Participants as we are today. |
|
Introduction of a materiality threshold to our Complaint Requirements |
Clarifies which complaints a Dealer must report to us, and the complaints to which a Dealer must respond in a substantive manner. |
Net positive – Clients alleging that a Dealer or Approved Person engaged in serious client-related misconduct will have their complaint responded to in a substantive manner. |
Neutral to minor positive – Depending on their current complaint handling practices, Dealers may be required to report more complaints to IIROC and respond substantively to more complaints. Some Dealers may be required to report fewer complaints and respond substantively to fewer complaints. Depending on the Dealer this could result in an increase or decrease in costs. However, our requirements for complaint reporting and management will be clearer. |
Net positive – We will only receive and review reports on complaints on the matters we care most about, being those that allege serious client-related misconduct or those that have been reported under Gatekeeper Obligations. |
|
Codification of the ComSet Reporting timing requirements |
Clarifies when Dealers must report specific matters to us by including timing requirements in the rule (as opposed to guidance). Extend the amount of time Dealers have to report the results of internal investigations to us from 5 to 20 business days. |
Neutral – Investors will not be impacted by this change, as there will be no change in the timing for reporting client-related matters to us. |
Neutral to net positive – Our timing requirements will be easier for Dealers to find, as they will be directly in the rule. Dealers will have 20 business days, instead of 5 business days, to report the results of any internal investigation. |
Neutral – We will receive the same information at the same time, for the most part. |
|
Extension of the ComSet Reporting Requirements to Employees |
Extends Approved Person reporting obligations under ComSet Reporting Requirements to employees, to clarify our current expectations and to ensure we know of all serious misconduct occurring at Dealers. |
Neutral to minor positive – Investors will not be significantly impacted by this change. We will likely see an increase in reported client-related matters, which could assist us in looking into such issues. |
Net negative – Dealers would have to report on the activities of their employees. Dealers have indicated this would result in an increase in human resources costs, but were unable to provide an estimate. |
Net positive – We will have information on employee significant misconduct under ComSet Reporting Requirements, which will help us to:
|
|
Reporting resolutions |
Clarifies that Dealers must report the resolution of client complaints to us, so that we have all relevant details relating to each reported client complaint.
|
Neutral to minor positive – We will have more information on each complaint filed with us, which will allow to conduct better reviews. |
Neutral to minor negative – Most Dealers are already reporting this information to us. For those who are not, this will increase their reporting to us. |
Net positive – We will have consistent, comprehensive information about client complaints, which will allow us to:
|
|
IIROC’s ability to request supporting documentation |
Allows IIROC to request any additional detail on matters Dealers file with us, or conduct an internal investigation on. |
Neutral to net positive – Investors will not be significantly impacted by this change. We may obtain more information on certain client complaints, which could help us in reviewing these complaints. |
Minor negative to neutral – Some Dealers may not be impacted, others may have to provide us with additional information on request. |
Net positive – We will have all information we require to review a matter. |
|
Reporting when Approved Persons and employees are subject to an investigation |
Ensures we are aware when another regulatory body investigates an Approved Person or a Dealer Member’s employee, which provides us with more information on Approved Persons and employees. |
Neutral - Investors will not be impacted by this change. |
Minor negative – Dealers may have to report more information to us, depending on whether any of their Approved Persons or employees are subject to an investigation. |
Minor positive – We will have information on investigations Approved Persons and employees, which will help us to better:
|
|
Reporting any substantial compensation paid to clients |
Ensures we are aware each time a Dealer provides substantial compensation to clients, which provides us insight into potential complaints or potential misconduct. |
Minor positive – We will have more information on potential complaints or misconduct, which could help us in reviewing these matters. |
Minor negative to neutral – For Dealers who already report this information to us, there will be no impact. For Dealers who do not, they may need to file more information to us. |
Net positive – We will have information on potential client complaints or potential misconduct, which will help us to better:
|
|
Reporting proceedings and civil actions |
Ensures we are aware of each time Dealers, employees or Approved Persons:
|
Neutral - Investors will not be impacted by this change. |
Minor negative to neutral - For Dealers who already report this information to us, there will be no impact. For Dealers who do not, they may need to file more information to us. |
Net positive – We will have more information on our Dealers, Approved Persons and their employees’ rule violations and other serious misconduct, which will help us to better:
|
|
Streamlined internal disciplinary action reporting |
Focus internal disciplinary action reporting on serious misconduct, to reduce filing for Dealers and focus the matters we review on what we care most about. |
Neutral - Investors will not be impacted by this change. |
Net positive – Dealers will likely see a reduction in the internal disciplinary matters they report to us. |
Net positive – We will receive less reporting, and it will be focused on the matters we care most about. |
|
Clarification of internal investigation requirements |
Ensures Dealers maintain detailed records of internal investigations. |
Neutral – Investors will not be impacted by this change. |
Minor negative to neutral – For some Dealers, there will be no impact. Other Dealers may need to collect and maintain more detailed records of internal investigations. |
Net positive – We will be able to conduct more comprehensive reviews of internal investigations, which will enable to better assess Dealer compliance and risk of non-compliance. |
|
Complaint Requirements |
||||
|
New client complaint handling standard |
Ensure Dealers are subject to a client complaint standard we can examine them to, which is consistent with the standard in National Instrument 31-103 – Registration Requirements, Exemption and Ongoing Registrant Obligations. |
Net positive – Dealers will be required to respond to their complaints in a manner a reasonable client would consider effective, fair and expeditious. |
Neutral - Dealers will be subject to a new standard, but it is consistent with existing requirements. |
Net positive – We will have a standard to which we can examine Dealers. |
|
Removal of distinction between verbal and oral complaints |
Treat verbal and written complaints the same, to enable a more accessible complaint process. |
Net positive – Clients will be able to submit their complaints in their preferred manner, without prejudice. |
Net positive – Dealers will no longer have to assess the merits of verbal complaints, and they will not have to ask clients to put their complaints in writing. |
Neutral – We do not anticipate this change will impact us. |
|
Clarification of our complaint handling requirements |
Ensure Dealers have sufficient resources to effectively manage client complaints. |
Net positive – Clients’ complaints will be examined and responded to effectively. |
Neutral – We expect most Dealers are already complying with this requirement. |
Neutral – We do not anticipate this change will impact us. |
|
Removal of requirement to handle complaints in a balanced manner |
Increase consistency with the Client Focused Reforms amendments, which will be effective December 31, 2021. Prioritize the interest of clients. |
Net positive – Dealers can put the client’s interests first when reviewing their complaint. |
Neutral – We are removing a requirement. We do not anticipate this will have a significant impact on Dealers. |
Neutral – We do not anticipate this change will impact us. |
|
Addressing systemic issues arising from client complaints. |
Encourage Dealers to take proactive measures when they identify a systemic issue, which could benefit impacted clients. |
Net positive – Clients impacted by a systemic issue may have a more positive outcome or receive compensation. |
Net negative to neutral – For Dealers who are already taking these proactive measures, there will be no impact. Dealers who aren’t taking these measures may incur additional costs. |
Neutral - We do not anticipate this change will impact us. |
|
Accessible acknowledgement and substantive response letters |
Clients will receive letters from Dealers in plain language and in a format that is accessible to them. |
Net positive – Clients will be better able to understand the responses to their complaints. |
Minor negative to neutral - For Dealers who are already responding to clients in plain language and in an accessible format, there will be no impact. Dealers who aren’t taking these measures may incur additional costs. |
Neutral - We do not anticipate this change will impact us. |
|
Updates to content of substantive response letters |
Ensure substantive response letters to clients properly describe how clients can refer their complaint to IIROC. |
Net positive – Clients will have better instructions on referring their complaint to IIROC. |
Minor negative – Dealers may need to update their substantive response letter templates. |
Minor positive – We will receive complaints from clients in our preferred manner, which will allow us to respond to them more effectively. |
|
Limiting internal ombudsman response letters to 90 days. |
Consistent treatment of Dealer response letters and internal ombudsman response letters, and faster resolution of client complaints. |
Net positive – Clients will have certainty in how long the internal ombudsman will take to respond to them. In some cases, clients will receive a response back from the internal ombudsman faster. |
Net negative to neutral – Depending on their current practices, internal ombudsmen may have less time to investigate and respond to client complaints. |
Neutral - We do not anticipate this change will impact us. |
|
Codification of acceptable practices outline in Notice 17-0229 relating to the communication of ombudsman services |
Ensure the OBSI’s services are clearly communicated to clients. |
Net positive – Clients will be able to readily access information about referring to their complaints to the OBSI. |
Minor negative to neutral - For Dealers who are already complying with the acceptable practices in Notice 17-0229, there will be no impact. Dealers who aren’t may incur additional costs. |
Net positive – We would be able to examine and enforce on the “acceptable practices” that were previously in guidance. |
|
Prohibiting the use of the “ombudsman” term and other similar terms in reference to a Dealer’s internal dispute resolution service. |
Ensure clients understand that a Dealer’s (or their affiliate’s) internal dispute resolution service is not independent from the Dealer. |
Net positive – Clients will have a better understanding of the nature of a Dealer’s internal dispute resolution service. |
Minor negative to neutral –Dealers who do not use the term “ombudsman” in referring to an internal dispute resolution service will not be impacted by this change. Dealers who do use the “ombudsman” term in reference to an internal dispute resolution service may incur one-time costs in renaming that service and its personnel. |
Neutral - We do not anticipate this change will impact us. |
MFDA and IIROC have consolidated
As of January 1, 2023 the MFDA and IIROC have come together as New Self-Regulatory Organization of Canada (New SRO).
New SRO has assumed the regulatory responsibilities of the MFDA and IIROC.
We have set up an interim website for updates and information related to the New SRO including:
Enforcement proceedings, membership lists, continuing education, investor education resources and any other information not set out above continue to reside on www.mfda.ca and www.iiroc.ca.