The Investment Industry Regulatory Organization of Canada has published the final version of its proposed reforms to requirements for retail client disclosure, suitability, and reporting.

The proposed rule changes form IIROC’s version of the so-called “Client Relationship Model”, which represents the remnants of the Ontario Securities Commission’s effort to reform retail regulation known as the Fair Dealing Model.

In a notice published Friday, IIROC sets out the details of the proposed rules and amendments, which it says are being introduced “to establish substantive requirements” to improve relationship disclosure, the disclosure and management of conflicts of interest, suitability assessments, and performance reporting.

“Disclosure of the details of the account relationship and the services to be provided are necessary to better inform retail clients of the nature of their account relationship. This disclosure, along with account cost and activity reporting will provide retail clients with important information to use in assessing the performance of investments in their account and whether their objectives and expectations for the account have been satisfied,” IIROC says.

A new rule is being proposed to clarify IIROC’s position regarding the management of material conflicts of interest, which will require dealers to develop and maintain policies and procedures to identify, disclose and address existing and potential material conflicts involving clients.

Amendments to the account suitability requirements are being introduced “to enhance the level of investor protection for retail clients” by ensuring that the suitability of investments in each client’s account is assessed whenever: a trade is accepted, a recommendation is made, securities are transferred or deposited into the account, there is a change of rep on the account, or there is a material change to the know-your-client information.

“These matters should also be viewed as key elements of a broader CRM framework and complementary to the fundamental obligation of all dealers and their representatives to deal fairly, honestly and in good faith with their clients,” IIROC notes.

IIROC’s proposals follow similar reforms finalized last year by the Mutual Fund Dealers Association of Canada, and the Canadian Securities Administrators are expected to publish proposed amendments to its registration reform rules to introduce new cost disclosure and performance reporting requirements.

The notice indicates that IIROC and the MFDA are participating in a working group developing the CSA’s proposals. “The CSA may decline to approve IIROC rules and amendments relating to cost disclosure and performance reporting if these omit aspects of the CSA’s proposals. In any event, once the CSA amendments are finalized, IIROC will amend its equivalent requirements, as necessary, to ensure that they are consistent with those of the CSA,” it says.

In addition to the proposed rules and amendments, IIROC’s proposal includes a draft guidance note and planned implementation periods for each of the proposed elements, all of which are being published for a 60-day comment period. The transition periods provided by the proposals range from elements that take effect immediately to others that won’t apply for three years, such as the requirement to provide new relationship disclosure to existing clients.

IE