The Investment Industry Regulatory Organization of Canada (IIROC) has a busy year ahead as it grapples with the evolving environment for investors, dealers and regulators.
IIROC published its new three-year strategic plan on Thursday, which sets out its regulatory vision through fiscal 2019 (ending March 31, 2019) and a list of its regulatory priorities for the year ahead. The overarching plan is for the self-regulatory organization (SRO) to become more efficient and effective in a variety of ways from supervision to enforcement, while also engaging more directly with investors in the process of to policy development.
Although the new strategic plan spells out the SRO’s long-term vision, IIROC also expects to grapple with several critical issues in the investment industry in the next 12 months, including the ongoing debate about a possible “best interest” standard and the prospect of regulatory restructuring that the SRO raised in a white paper it published last year.
IIROC is planning to respond to the feedback it received on its white paper in October, according to the SRO’s list of priorities. The paper raised the idea of allowing investment dealers to employ mutual fund reps and allowing them to utilize directed commission structures, which may, in turn, lead to a fundamental restructuring of the self-regulatory landscape in Canada.
However, before IIROC responds to that major issue, the SRO has several key initiatives set for the summer, including a planned survey of investment dealers on their approach to dealing with compensation-related conflicts, which is slated for June.
The results of that research will, in turn, inform IIROC’s approach to a best interest standard. By the end of 2016, IIROC says that it will have analyzed the results of the compensation-related conflicts survey and the Canadian Securities Administrators (CSA) consultation paper that was released last month proposing several reforms to retail regulation and raising the possibility of introducing a statutory best interest standard in several provinces. In December, IIROC aims to “determine next steps required to clarify our best interest requirements.”
In the meantime, IIROC also intends to introduce enhanced compliance exam procedures for know-your-client (KYC) and suitability practices in June; publish new guidance on dealing with seniors; and survey dealers’ cyber security preparedness. (The results of that last survey are slated to be reported in October).
IIROC also says that it plans to open discussions with the CSA next month on enhancing its reliance on IIROC for registration; and it will hold roundtables to discuss market structure issues affecting small-cap issuers.
In August, the SRO plans to enhance compliance exam procedures around dealers’ use of social media. And in October, it will release its first, annual “suite of complaint and inquiry statistics and trend information” to the public and dealers. Then, in November, IIROC expects to re-assess its existing KYC and suitability requirements and “determine next steps” in that area.
Looking further out, the strategic plan indicates that IIROC is also looking to expand its arsenal of enforcement options “to help us address wrongdoing in a fair and proportionate manner.” To that end, it aims to research and evaluate potential “alternative forms of disciplinary action” and decide what to do in this area by February 2017.
The strategic plan also promises measures to improve policy development and consultation, including greater engagement with investors; enhanced information sharing; heightened market supervision; and strengthened enforcement.
“This new strategic plan provides a strong blueprint for the future,” says Andrew Kriegler, president and CEO of IIROC, in a statement. “It charts a path that will allow IIROC to provide efficient and effective regulation while addressing the sweeping changes that are impacting all of IIROC’s stakeholders.”
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