The Investment Industry Regulatory Organization of Canada has published a review examining its corporate governance structure, and recommending a number of changes.

The review, which was carried out by IIROC’s corporate governance committee, concludes that the regulator’s existing governance structure is effective and meets the requirements set out in the regulator’s recognition order. However, it also offers a series of recommendations for improving governance, including boosting the size of the board, and establishing a vice chair position.

The report suggests that permitting the board to be composed of up to 17 directors “would allow additional flexibility in ensuring that there is appropriate representation on the board of the diverse constituencies and interests that are served across Canada by IIROC.”

It notes that with only five dealer director seats currently available, “it is difficult to ensure that there is appropriate representation from various geographical regions of Canada of the different dealer constituencies, which include bank-owned dealers, independent dealers, foreign-owned dealers, retail firms, including those that offer discretionary management, firms specializing in venture capital finance and proprietary trading firms, among others.”

Additionally, the report recommends having a director appointed as vice chair to share the chair’s workload, and aid succession planning. It notes that IIROC anticipates appointing one or more vice chairs following the 2010 annual meeting.

The report also calls for allowing a principles-based exception to the definition of independence, suggesting that the current rule-based definition can be “excessively exclusionary on a technical versus substantive basis”.

The report also suggests adopting a one-year “cooling-off period before an individual connected with a dealer, a market, or with IIROC itself, could be considered independent. It also proposes that more biographical information on prospective directors be provided ahead of board elections.

IE