The Investment Industry Regulatory Organization of Canada (IIROC) is planning to provide further guidance for investment dealers on conflicts of interest following the landmark decisions that the Canadian Securities Administrators (CSA) introduced last week on best interest standards and embedded commission structures.
At the same time, the self-regulatory organization (SRO) also is reviewing how it regulates advice and it has begun contemplating how to oversee the investment industry’s possible use of blockchain technology. These goals are part of IIROC’s policy priorities for the current fiscal year, ending March 31, 2019, that were unveiled on Monday.
In the wake of the CSA’s announcement, which includes proposals for incorporating best interest principles into its existing suitability and conflicts rules, IIROC announced that it plans to “publish additional guidance on the approaches dealers can use to address conflicts of interest, with particular focus on compensation-related conflicts.”
As the provincial regulators also indicated as part of their proposals that they intend to ban embedded commissions for discount brokerages, IIROC states that it will “continue to engage with the CSA toward alignment on any proposals on embedded commissions.”
In addition, the SRO reports that it’s continuing to review its approach to regulating the provision of financial advice, with the objective of ensuring that the rules enable innovation, such as the emergence of digital advice models. To that end, IIROC reported that following an initial analysis, the SRO now is working with Accenture on an industry consultation process to identify possible regulatory barriers to innovation and to consider how regulation may have to evolve to enable future innovation.
“IIROC is taking a forward-looking approach to accommodating new innovations and business models, while continuing to protect investors no matter how they get investment advice and services,” said Andrew Kriegler, president and CEO of IIROC, in a statement. “Our priorities focus on providing more efficient, relevant and proportionate regulation as we adapt to the changing needs of investors and the industry.”
Along with this focus on the evolution of advice, IIROC noted that it has begun examining the possible applications of blockchain technology (including digital assets, cryptocurrencies and initial coin offerings) in the investment industry: “To help us keep pace with this fast-evolving area, we have formed a working group that will build on IIROC’s knowledge and recommend a potential regulatory response.”
The SRO’s agenda for this year also includes plans to propose a “safe harbour” rule that would enhance the ability of dealers to intervene in suspected cases of financial abuse involving seniors and other vulnerable investors; finalizing its new plain language rules; and continuing to pursue added enforcement powers and developing alternative forms of disciplinary action.
“It’s important that our stakeholders understand both our immediate priorities and our long-term goals and strategies,” Kriegler said. “We will continue to consult broadly to ensure we take into consideration stakeholders’ views.”