The Investment Dealers Association of Canada has issued a notice that aims to provide guidance on the allowable consolidation of back office activities between an IDA member and its affiliated Canadian financial institution.

The notice says that common staff will be able to handle securities clearance, settlement, maintenance of records and/or other operational functions on behalf of both the IDA member and its affiliate. However, IDA regulations require member firms to maintain an adequate system of books and records. “These records must be separate and distinct so that customer assets are not co-mingled with another legal entity’s customer assets unless the requirements of an introducing/carrying broker arrangement are met,” it says.

The notice reports that firms have asked the IDA to establish the requirements for the consolidation or integration of back office operations between a SRO member firm and its affiliates. This type of arrangement involves sharing the IDA member firm’s electronic data processing service bureau company code with an affiliate whereby there is no commingling of customer assets under administration between the member and its affiliate. This condition is achieved by operating separate bank and security custody accounts in the name and control of the IDA member and its affiliate.

To obtain regulatory approval for this, the firm must submit a written request for review of the arrangement to the IDA. The arrangement must meet several criteria to win approval.