The Investment Industry Regulatory Organization of Canada (IIROC) continues to clarify the details of new disclosure requirements that are being implemented as part of the Client Relationship Model (CRM) reforms.
IIROC Monday published an updated FAQ document that aims to answer some of the common queries it receives about the impact of specific provisions of the CRM requirements.
For example, the notice clarifies that the requirement to provide pre-trade disclosure of charges does not apply to trades in segregated funds.
And, while it acknowledges that the rules only strictly apply to trades in securities, it stresses that it would be impractical to restrict pre-trade disclosure to other sorts of investment products, such as futures contracts.
“Narrowing the scope of trades subject to pre-trade disclosure to the legislative minimum will likely result in client service issues as clients will not understand why there is pre-trade disclosure of charges for some trades and not for others and would introduce unnecessary complexity to the processes used by [dealers] to meet their trading-related charge disclosure obligations,” it says.
As a result, the notice explains that IIROC expects that the trades subject to pre-trade charge disclosure would be consistent with all other forms of client reporting (i.e. trade confirmations, account statements and various client reports (off-book positions, fee/charge, and performance)).
It also deals with a variety of other issues, such as how order execution only dealers must communicate pre-trade charge information; the impact of the revised definition of “market value”; and, it confirms that conditions under which IIROC will grant an exemption from the requirement to provide clients with reports on positions held outside the dealer.
This latest FAQ supersedes a previous document, which was issued last October.