Investment dealers would be required to alert clients to their membership in the Investment Industry Regulatory Organization of Canada (IIROC), under new rules proposed Thursday.
IIROC has published proposed amendments to the requirement for dealers to advise their clients that they are subject to oversight by the self-regulatory organization. The proposed rules “are designed to inform the investing public which investment firms and individuals are regulated by IIROC and the requirements and regulations to which they must adhere,” IIROC says in a statement.
The goal of the rules is to raise public awareness of IIROC’s regulatory oversight, educate investors about the benefits of dealing with IIROC-regulated firms, and to help investors to assess the regulatory status of firms and advisors.
“As a public interest regulator, IIROC believes it is important that investors know whether the firm or advisor they are dealing with is regulated, who regulates them and what professional standards are required,” says Wendy Rudd, senior vice president, member regulation and strategic initiatives, at IIROC.
Under the existing rules, it is optional for dealers to use of the IIROC name and logo on their materials. The new proposals would require dealers to: include the IIROC logo on all client account statements; distribute an IIROC brochure to new retail clients; and, link to IIROC’s AdvisorReport database (which allows investors to investigate advisors’ backgrounds, qualifications and disciplinary history) on their websites.
The revised proposals incorporate changes from an earlier version of the proposed rules in response to comments received on the proposals. For example, the rule would no longer require dealers to put IIROC’s logo on trade confirmations, as it initially proposed, amid concerns that this would be costly to firms with little benefit to clients.
“We believe that requiring [dealers] to include the IIROC logo on client account statements will adequately increase investor education and awareness about whether the investment dealer with which they have an account is subject to the regulatory oversight of IIROC,” the SRO says in rules notice concerning the proposal. “In our view, requiring [dealers] to also display the IIROC logo on client trade confirmations would not significantly increase investor education and awareness and therefore does not justify the increased cost to [dealers].”
The latest proposal is open for comments for 30 days. If it is approved, firms will have six months to implement the changes, IIROC says, except the requirement to include its logo on account statements, which would be phased-in over a two-year period.