Following an expedited hearing Friday, the Investment Industry Regulatory Organization of Canada (IIROC) imposed several conditions on the continued approval and membership of Toronto-based Northern Securities Inc.(NSI).

The hearing was held amid concerns that NSI’s carrying broker, Penson Financial Services Canada, is closing up shop at the end of the year, and terminating its carrying arrangement with NSI.

As a result, the panel requires that by the close of business on December 31, NSI must have an agreement with one or more dealers that would result in the transfer of all of its client accounts from Penson by Jan, 15, 2013. If the firm doesn’t have such a deal in place, it must assign all of its client accounts to Penson.

Additionally, among other things, NSI must cease any sales and advisory activity for retail or institutional customers by the end of the year; and, restrict itself to mergers and acquisitions, research and corporate finance.

The firm is also required to contact all of its clients by December 17, to inform that by the end of the year, they will be restricted to liquidating trades and/or transfer-outs as a result of the termination of the relationship between NSI and Penson; that clients have the right to transfer their accounts to another dealer immediately to avoid restrictions to their accounts; and, that they must instruct their new dealer to notify Penson of any transfer by the end of the year.

Earlier this week, NSI did send a letter to clients alerting them to its efforts to replace Penson as its carrying broker by the end of the year; and said that it has been in “active discussions” with a number of other carrying brokers and self-clearing firms that could provide it with clearing, settlement, and custodian services.

NSI is a subsidiary of Toronto-based Northern Financial Inc. (TSXV:NFC).