The Investment Dealers Association of Canada is planning to develop a qualifying exam for chief compliance officers.

The IDA’s board approved by the plan at their October meeting as part of the IDA strategic plan, and Paul Bourque, senior VP member regulation, reports that the IDA’s Larry Boyce is drafting an operational plan that will call for the development of the exam in fiscal 2004-05 and the implementation of the exam for IDA member firms in 2005- 06.

Bourque revealed the plans at the IDA’s Compliance and Legal Sections CLS Annual Compliance Conference on December 2.

The plans will have to be approved in the upcoming IDA budget process. “As a critical part of the firm’s governance structure, the CCO’s responsibilities are simply too important to leave in the hands of unqualified individuals,” he said. “The question becomes, in the short term, how do you weed out the unqualified and in the long term, how do you develop the proficiency.”

“I believe the challenge is to bridge the gap between detailed and to a degree mechanical account supervision activities and high-level exhortations to obey the law and comport oneself in a “becoming” fashion,” he said. Bourque proposed that an additional module should be developed for the Partners Directors Officers exam to be written by those who are designated as the CCO.

Additional topics would include:

  • developing and implementing firm policies and procedures;
  • developing and implementing surveillance systems;
  • developing and implementing effective transfer of regulatory knowledge systems;
  • developing and implementing effective education and training systems;
  • designing and producing exception reports;
  • conducting investigations of irregular activity;
  • delegation of compliance and supervisory responsibilities; and
  • demonstrated awareness of conflicts of interests and imprudent, unsuitable and abusive conduct arising in the operation of client accounts, trading activities, corporate finance transactions and other aspects of the dealers business.

“In my view, a Chief Compliance Officer qualifying exam is the next step in supporting the compliance function in the member firms. The risks of continuing in the absence of any proficiency standards are simply too great,” he said. “Compliance proficiency standards should be developed and implemented by the people in the industry who have to make decisions every day in the complex conflict-laden world of an investment dealer. Failing industry initiatives you can be sure the courts and government regulators will be more than willing to engage in this exercise on your behalf.”

The initiative still requires IDA budget approval, and Bourque allowed that there are many issues that have to be resolved in developing a proposal for a CCO qualifying exam, including: grandfathering; on-going exemptions; and equivalent qualifications.

Also an IDA subcommittee is currently developing a voluntary course for junior compliance staff.