The Investment Industry Regulatory Organization of Canada has published proposed rules relating to dealer organization and registration as part of its project to rewrite its rules in plain language.

The latest rule rewrite package deals with issues such as dealer structure, ownership arrangements, IIROC membership and back office arrangements.

In addition to rewriting the existing rules in plain language, several IIROC rules are also receiving substantive revisions to eliminate unnecessary provisions, clarify the regulator’s expectations, ensure that the rules reflect actual IIROC practices, and ensure consistency with other IIROC rules and securities legislation.

For example, a rule is being broadened include the ability to suspend members, and to require IIROC approval (rather than district council approval) to terminate or suspend a dealer.

Another proposed rule clarifies that clients of introducing brokers are considered to be clients of both the introducing broker and the carrying broker since the services provided to the client, and related obligations, are split between two dealers.

“Specifically, each dealer must be accountable, and must comply with the applicable IIROC rules, for the services they provide to and obligations they undertake for the client. In addition, the introducing broker must ensure the client is properly served, irrespective of which dealer is providing the particular service,” IIROC says.

A proposed rule also introduces a new section outlining the general requirements that must be met in order for a dealer to carry client accounts of a foreign affiliate dealer, which are similar to those that apply to an introducing broker/carrying broker arrangement between two dealers.

In addition, dealers will no longer be required to give a reason for resigning from the regulator. “IIROC’s primary concern is ensuring that clients are properly protected in the event of a resignation. Provided a [dealer] fulfills the other requirements of resignation, including providing audited financial statements that show the [dealer] is able to meet its liabilities, IIROC is not primarily concerned with the reasons for the resignation. Therefore this requirement was determined to be unnecessary,” it says.

The rules are out for a 90-day comment period.

IE