The latest phase of the rulebook consolidation project of the Canadian Investment Regulatory Organization (CIRO) covers a wide range of policy areas — including its approval regime, proficiency requirements and certain conduct rules — that will have a mixed impact on industry firms, particularly mutual fund dealers.
CIRO published for comment the fourth tranche of proposed harmonized dealer rules, which focuses on rules regarding approval requirements, business conduct and client account rules, and managing significant risk.
Overall, the self-regulatory organization (SRO) said, the proposals should have a positive impact on investors; be “mostly neutral” for investment dealers, with some positive effects; and be net positive for mutual fund dealers, which will see the most notable changes.
“Some of these requirements present a significant change to the [fund dealer] rules with the intention to harmonize the standards for approved persons across [SRO dealers] with the existing requirements set out in the [investment dealer] rules,” the SRO said in the notice detailing the proposed rules.
For instance, the proposals would introduce new approval requirements for certain categories at fund dealers, such as executives, directors and supervisors, and they would also require fund dealers to have a chief financial officer.
“Standardizing the approved person regime and proficiency requirements will ensure that the clients of mutual fund dealers can be confident that their advisers, and the oversight of those advisers, are subject to the same standards as are afforded to clients of investment dealers,” it said.
Alongside these new requirements, the changes will give mutual fund dealers “more flexibility in how they conduct their business,” the SRO said.
“The benefits of the new flexibility afforded to mutual fund dealers may be somewhat offset by certain more stringent documentation and record-keeping requirements, which would likely be new to only the smaller mutual fund dealers, and additional regulatory requirements with respect to the approved person categories and corresponding proficiencies,” it said.
Overall though, the SRO said, the negatives for fund dealers should be outweighed by the positives.
The proposals also address certain rule provisions regarding conflicts of interest, personal financial dealings with clients and referral arrangements, along with changes involving know your client and relationship disclosure requirements.
The comment period on the proposed changes runs until Feb. 4.