With the next deadline quickly approaching for the implementation of the second stage of the client relationship model (CRM2), many financial services firms are still in limbo about how to put some of those rules into place, said Adrian Walrath, assistant director at Toronto-based Investment Industry Association of Canada (IIAC), at Investment Executive’s CRM2 breakfast seminar in Toronto on Thursday.

The next set of CRM2 concerns the development and delivery of enhanced account statements, which must be in place by Dec. 31.

One of the rules causing concern is the reporting of off-book or client-name accounts. Although these accounts are common for firms registered with the Mutual Fund Dealers Association of Canada (MFDA) and those firms have adapted to this type of reporting, this is not the case for dealers under the Investment Industry Regulatory Organization of Canada (IIROC), said Walrath.

“For many [IIROC] firms, [these accounts] are a small percentage of their holdings and they would have to build entire shadow systems to capture the information,” Walrath said.

The expense and time required to create a system to support a small number of accounts concerned IIROC-member firms, she added.

IIROC has created an exemption within its own CRM2 rules to the effect that firms that applied and received approval to be excluded could avoid having to provide reporting for these types of accounts. Firms were able to apply for this exemption in June and September and are currently in the process of discovering whether the exemption will apply to them, said Walrath.

Another problematic area is the requirement to provide a market value for each invested security on these enhanced reports. More specifically, the difficulty surrounds securities for which a value cannot be determined, referred to as “not determinable” securities. These types of securities may cause concern for clients as a not determinable security may function as a “zero” in performance reporting.

This has firms wondering how the can accurately report the value of not determinable securities without scaring clients.

“Do you keep [the value] as not determinable and it functions as a zero. Now your performance report looks like [performance has] decreased dramatically depending on the weight of the stocks? If it’s a larger part of a client’s portfolio, [the client] might see a huge decrease,” said Walrath.

This decline in value may mislead the client into thinking that his or her portfolio has underperformed, but this might not actually be the case. For instance, the value of a private security can be difficult to ascertain, and thus could be recorded as not determinable (or zero) on the new statements.

This is an area in which firms are still working with their vendors to determine a solution, Walrath said.

For more information on CRM2, watch for CRM2 Guide 2015, a supplement to the October 2015 issue of Investment Executive.