The Investment Industry Regulatory Organization of Canada (IIROC) has exempted 44 investment dealers from certain reporting requirements imposed under the second phase of the client relationship model (CRM2) reforms scheduled to take effect on Dec. 31, which will require firms to send quarterly reports to clients that details their off-book holdings.
Specifically, IIROC has granted 44 exemption requests from 46 dealers, covering approximately $2.2 billion in client assets that are held off-book. IIROC has been considering requests for exemptions from the reporting requirement for firms that have relatively small amounts of client assets held off-book, so that firms don’t have to invest in expensive reporting mechanisms for small numbers of clients or assets.
To receive these exemptions, IIROC has said that firms must not be receiving any ongoing compensation from the off-book assets; they must encourage the clients to bring those assets in house; and the amounts must be relatively small.
IIROC spells out the results of the exemption requests it has received in this area in a notice, which reports that exemptions have been granted to firms, representing just more than 100,000 clients and just less than $2.2 billion in assets under administration (AUA). In the context of the investment industry’s overall clients base of almost 8 million and $1.4 trillion in total AUA, this represents about 1.25% of clients and 0.16% of AUA.
Of the 46 firms that sought exemptions, 29 were able to show that they met all of the conditions that IIROC set out for an exemption. The remaining 17 firms didn’t meet all of the conditions, so their requests were reviewed on a case-by-case basis. The regulator granted exemptions given special circumstances, such as the holdings involving RESP/RDSP assets; foreign clients; or foreign assets. Or, firms have been given until June 30, 2016, to reduce off-book holdings either by converting them into on-book assets, or moving them to another dealer.