The investment industry continues to express concerns as the Canadian Investment Regulatory Organization (CIRO) continues rewriting its rulebook.<\/p>\n
Over the summer, CIRO consulted on the latest phase of its effort to consolidate the existing rulebooks for mutual fund and investment dealers.<\/p>\n
The self-regulatory organization (SRO) has carried out three parts of a planned five-phase project to craft a single rulebook. From the outset, the industry called for this overhaul to occur in one fell swoop \u2014 with the new rulebook coming into force once all five phases are complete.<\/p>\n
That stance was reiterated in the latest consultation.<\/p>\n
\u201cIt is only once all five phases of the project are completed that a comprehensive analysis can be done to ensure nothing has been missed and that nothing within the rules is contradictory,\u201d the Investment Funds Institute of Canada (IFIC) said in its submission.<\/p>\n
Adopting rule changes all at once, rather than sequentially, will also make it easier for firms to determine how best to implement the new requirements within their own businesses and minimize any client confusion that may arise.<\/p>\n
\u201cIn short, a concurrent implementation will allow the complete set of rules to arrive as a cohesive whole, and will maximize their impact in the market in a positive manner,\u201d IFIC said.<\/p>\n
The Investment Industry Association of Canada also called for CIRO to publish a draft of the new rulebook for comments once all five phases of the consolidation project are complete.<\/p>\n
Support for this approach was not universal. The Canadian Advocacy Council of CFA Societies Canada\u2019s (CAC) submission said that, while the council supports implementing the new rules once all consultations are complete, it doesn\u2019t believe an additional consultation on the final rulebook is needed before the new rules can be adopted.<\/p>\n
\u201cWe would encourage CIRO to instead focus its resources on expediting the implementation of the consolidated rules and therefore proceed with the approval without republication once the phased consultations are complete,\u201d the CAC said.<\/p>\n
On Sept. 12, CIRO stated that it will republish all rules in the winter of 2025-2026 and subsequently adopt the new rulebook in one go rather than implementing it in stages.<\/p>\n
The CAC also suggested a one-year transition period to implement the final rules, saying more time shouldn\u2019t be needed given the project\u2019s lengthy consultation process. Instead, firms that want more time should seek relief from CIRO.<\/p>\n
Some industry groups have requested at least two years for the transition. The Canadian Bankers Association\u2019s (CBA) submission said firms should have a minimum of 24 months to update their systems, adopt new processes, revise client disclosures and make other needed adjustments \u2014 with longer transitions allowed for changes with major operational implications.<\/p>\n
The proposals to double the maximum fine for regulatory violations to $10 million from $5 million and to toughen the terms of industry suspensions also attracted a fair amount of feedback.<\/p>\n
Industry trade groups were emphatically opposed to doubling the fines. For example, the CBA\u2019s submission said the proposal to adopt a $10-million maximum was \u201cwell outside the scope\u201d of the rule consolidation project, \u201cnot in line with the spirit\u201d of the SRO\u2019s sanctioning guidelines and would exceed the maximums in force among provincial regulators.<\/p>\n
The CBA also argued that higher maximum penalties risk \u201creducing the availability of investment advice to the public due to a chill on professionals and firms engaging in business under such conditions.\u201d<\/p>\n
Yet, the proposal had supporters. For example, the CAC strongly agreed with raising the ceiling on potential fines, and said doing so \u201cshould serve to increase deterrence.\u201d<\/p>\n
IG Wealth Management also supported the higher potential penalties while offering a caveat: \u201cWhile we support the overall recommendation, we expect that CIRO will continue to apply fines in a proportionate manner while ensuring there is not general inflation to all monetary fines applied in enforcement matters.\u201d<\/p>\n
In addition to potentially increasing maximum monetary penalties, the consultation contemplated taking a tougher line with reps who are suspended or banned for misconduct. The goal would be to prevent reps from working for a dealer in another capacity while their registration is on hold.<\/p>\n
Here, too, the industry associations pushed back.<\/p>\n
\u201cAn individual who is subject to sanctions should not be prohibited from earning a living income within the industry,\u201d argued the Federation of Independent Dealers\u2019 (FID) submission. The FID warned that tougher employment restrictions could put firms in conflict with labour laws or push them to terminate these employees.<\/p>\n
\u201cCIRO should consider expanding the scope of prohibited activities for sanctioned individuals without denying their right to employment,\u201d the FID said.<\/p>\n
Finally, the consultation addressed dispute resolution. Specifically, CIRO wants fund dealers to participate in its arbitration service, which was previously available only to investment dealers. The SRO also wants the Ombudsman for Banking Services and Investments (OBSI) to provide it with information about client complaints involving dealers and reps.<\/p>\n
IFIC said mutual fund dealers should not be required to take part in CIRO\u2019s arbitration service \u2014 at least not yet. IFIC noted the framework for industry dispute resolution remains under review, as the regulators that oversee OBSI are considering giving OBSI binding authority to resolve complaints. The association also said a comprehensive review of the system for dealing with client complaints and client\/industry disputes should take place first.<\/p>\n
\u201cWe urge CIRO to participate in such an analysis and, therefore, to delay the requirement for mutual fund dealers to participate in the CIRO arbitration process until the CSA\/OBSI project is completed,\u201d it said.<\/p>\n
The FID opposed the proposal to allow OBSI to share more information with CIRO, saying it \u201creject[s] outright the idea of CIRO accepting OBSI investigation materials.\u201d<\/p>\n
\u201cOur members have had sufficient experience with OBSI over the years to underpin our belief that CIRO provides the higher standard of investigation and expertise in securities matters. We do not want that high standard to lose its edge or regulatory perspective by referencing materials from a consumer complaint body,\u201d the FID said. \u201cWe want our SRO to do its own investigations.\u201d<\/p>\n
This article appears in the September issue of <\/em>Investment Executive. Subscribe to the print edition<\/a>, read the digital edition<\/a> or read the articles online<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Industry at odds with CIRO\u2019s proposals on maximum penalties and dispute resolution<\/p>\n","protected":false},"author":73592,"featured_media":414513,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[3021,3013],"tags":[3609,37533,2522],"yst_prominent_words":[6370,47408,11711,10703,10586,6694,6690,6640,6424,12,6212,5934,5034,4784,14],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/492347"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/73592"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=492347"}],"version-history":[{"count":5,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/492347\/revisions"}],"predecessor-version":[{"id":492687,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/492347\/revisions\/492687"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media\/414513"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=492347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=492347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=492347"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=492347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}