From the Regulators

Streamlining of rules, further guidance should be considered

By James Langton |


The Investment Industry Regulatory Organization of Canada (IIROC) should consider how well its existing rules on compensation-related conflicts are working and whether more guidance on the matter is required, the Investment Industry Association of Canada (IIAC) suggests.

IIAC President and CEO Ian Russell highlights the rules surrounding compensation-related conflicts and IIROC's compliance review and survey focusing on these conflicts in his monthly letter to the industry, released on Thursday.

The IIAC acknowledges that the results of these reviews, which were conducted in 2015 and 2016, indicate that "firms need to improve the quality of disclosure of compensated-related conflicts."

At the same time, Russell says that IIROC should examine the operation of its principles-based conflict rule (known as Rule 42, in force as of 2012) alongside the assorted other rules that also aim to deal with conflicts of interest, with an eye to determining areas where the rules and guidance could be streamlined and/or instances where regulatory guidance needs to be augmented.

In the letter, Russell recommends that IIROC consider a set of broader questions, such as: whether Rule 42 has been effective at improving the management of compensation-based conflicts; whether the rule imposes needless compliance costs; is there any duplication of compliance requirements that address managing conflicts; and whether additional guidance on complying with Rule 42 necessary.

"The industry views this review as a positive initial step, anticipating more detailed guidance on compensation-based conflicts and an assessment of the overall effectiveness of Rule 42, particularly in conjunction with other IIROC rules and guidance dealing with conflicts of interest," Russell's letter concludes.

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