IIROC to prioritize compensation-related conflicts in the year ahead

On the policy front, while the debate over best interest standards continues to rage among provincial regulators, IIROC says that ensuring dealers manage conflicts in clients’ best interests is one of its top priorities for the coming year.

The SRO published the results of its review of compensation-related conflicts and issued new guidance for dealers earlier this year. In the year ahead, IIROC plans to enhance its compliance examination procedures to focus on conflicts, the impact of compensation grids, sales targets and disclosure, and compliance with the mutual fund sales practices rules.

Read: MFDA sets out key compliance and policy priorities for year ahead

IIROC is also aiming to work with the provincial regulators to ensure that requirements in this area are harmonized and to make clear that “disclosure alone is not sufficient to address conflicts, particularly compensation-related conflicts … must be avoided or addressed in another way before disclosure is considered.”

At the same time, IIROC is also planning to examine whether its existing rules create any needless barriers to entry for innovative new advice models, including automated advice through robo-advisors.

“Dealers’ advice and service offerings continue to evolve, the provision of advice is increasingly automated, and non-dealer entrants bring new competition, IIROC rules and guidance need to keep pace,” it says.

Enforcement also continues to be a top priority for IIROC. During the past year, the SRO has successfully lobbied provincial governments in Alberta, Ontario and Prince Edward Island for greater enforcement powers; it also plans to put those powers to use in the coming year.

“In [fiscal 2018],” IIROC says, “we will begin to apply our new powers, and continue our efforts to achieve the same legal authority in the remaining provinces and territories.”

IIROC will also continue to seek greater evidence collection powers, which are already being introduced in Alberta, along with its long-running push for statutory immunity for the SRO and its staff when acting in good faith — a measure that Alberta is also adopting.

In addition, IIROC is considering alternative forms of disciplinary action and enhanced enforcement tools. In 2018, the SRO plans to seek public and industry input regarding potential new enforcement measures.

The coming year will also see IIROC begin the development of a new market surveillance system that will enable it to carry out cross-dealer, cross-product and cross-asset surveillance. It also plans to try to address areas of possible regulatory arbitrage and to continue work on the investment industry’s cybersecurity efforts, among several other strategic initiatives.

“IIROC will continue to focus on priorities that enable us to provide more efficient and effective regulation that can adapt to changes in the investment industry and investor behaviour,” says Andrew Kriegler, president and CEO of IIROC, in a statement. “We will ensure that regulation is appropriate, proportionate and scalable, and that investors are protected no matter where they choose to engage on the growing spectrum of investment services being offered.”

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