The new self-regulatory organization, the Canadian Investment Regulatory Organization (CIRO), passed its first oversight review by the Canadian Securities Administrators (CSA).
The CSA published a report detailing the results of the provincial regulators’ first review of CIRO, which turned up just two issues that call for changes to the SRO’s procedures in the financial compliance area — issues that have already been addressed.
Specifically, the provincial regulators called for revisions to the SRO’s procedures to ensure that regulators are alerted when early warning letters or capital deficiency letters are issued to dealers.
Failing to warn all relevant regulators when a dealer is facing financial issues could hamper their ability to oversee the industry, the report noted.
Additionally, the CSA called for CIRO to beef up its procedures for putting fund dealers into early warning status when financial issues arise during compliance exams.
The CSA said that failing to put a firm into early warning “on a timely basis could exacerbate existing issues [and] could result in material financial loss to the [dealer] or its clients.”
According to the report, CIRO acknowledged both concerns and has already updated its policies to address those shortcomings.
The other areas examined in the CSA’s review — CIRO’s corporate governance, and its trading review and analysis (TR&A) — didn’t turn up any issues for the CSA.
“Based on the work performed, staff are satisfied with CIRO’s progress in developing adequate processes in the corporate governance area and establishing regional councils and the national council,” the regulators’ said in their report.
In terms of trading oversight, the CSA also flagged “opportunities to further enhance the existing TR&A processes” for alerting the provincial regulators when possible securities violations (such as alleged insider trading or market manipulation) are being investigated.
Apart from these issues, the regulators said they “did not identify concerns with CIRO meeting the relevant terms and conditions of the [regulators’] recognition orders” in the areas they reviewed.