From the Regulators

Dealers winding up their businesses would get a break on fees

By James Langton |

Brokers that are winding up their businesses will face reduced regulatory fees under a rule change proposed by the Investment Industry Regulatory Organization of Canada (IIROC).

IIROC published proposed amendments Thursday that would allow firms that are suspended, terminated, or surrendering their membership in the self-regulatory organization to only pay fees to the end of the quarter when they have largely wrapped up operations, rather than for the full year.

In a notice spelling out the change, IIROC says that its primary objective "is to promote a fair and equitable regulatory environment which recognizes that a [dealer's] share of fees should be based on its usage or consumption of IIROC's regulatory services."

Typically, a dealer's annual IIROC fees are set for the fiscal year and then paid in quarterly instalments by the dealer each year. In cases when a firm is winding up, but it is prevented from ceasing operations before these annual membership fees are calculated, they are required to pay fees for the full year, regardless of the fact that they don't really need to be regulated.

To address that issue, IIROC is proposing to change its rules so that membership fees should be payable only until the end of the quarter in which certain conditions have been met by a firm that is suspended, terminated, or surrendering its registration. Those conditions include that client accounts have been transferred to a new dealer, and that it has no registered personnel remaining, except for its top compliance officials.

The proposals are out for comment for 30 days.