The Ontario Securities Commission is seeking comment on the Investment Dealers Association of Canada’s proposed new know your client requirements, which will push dealers to peer behind the corporate veil.

The proposed changes to KYC practices were adopted at the IDA’s board meeting in late June. The proposal pushes firms to identify the beneficial owners behind a corporate account.

This represents a significant change from the current practice and requirements in the industry, and comes after the B.C. Securities Commission hearing regarding Jean-Claude Hauchecorne, in which the BCSC concluded that the KYC rule requires a broker to look behind any corporate veil to determine who has a financial interest in the account.

As a result of that hearing, the BCSC requested clarification from the IDA of its KYC rules, in particular, when firms should attempt to determine the beneficial owners of corporate accounts and what compliance controls are necessary for these accounts.

The new by-law also responds to changes that were recently made to the 40 Recommendations of the Financial Action Task Force on Money Laundering. Rule changes are required to keep IDA firms in compliance with these efforts.

The objectives of the proposed amendments are to ensure that firms obtain sufficient information with regard to the accounts of corporations, trusts and similar entities to enable them to properly monitor and supervise the activity in those accounts.

The amendments also make IDA regulations consistent with international customer due diligence standards designed to combat money laundering and terrorist financing.

In other IDA matters, the OSC reports that the IDA has once again withdrawn a proposed by-law that would permit IDA firms that receive commissions on the sale of securities to pay referral fees to or split commissions with other firms. The IDA has withdrawn the proposed by-law “in order to properly consider the comments received from the CSA”.

As well, the IDA has revised its policy dealing with its members sharing office space with other financial firms. The revised policy is designed to ensure that where an IDA member carries on business in the same location as a financial services firm, clients are informed of the products they are purchasing, clients are not confused as to which entity they are dealing and that clients understand the relationship that a IDA member may have with the firm.