Canadian securities regulators put out a notice today updating the progress of their electronic audit initiative.

The goal of the project is “to investigate, design and implement a comprehensive solution capable of fulfilling Canadian securities audit trail requirements”.

It is currently named TREATS which stands for Transaction Reporting Electronic Audit Trail System.

TREATS was initiated and is managed by the Canadian Securities Administrators, Market Regulation Services Inc., Bourse de Montréal Inc., the Investment Dealers Association of Canada, and the Mutual Fund Dealers Associations.

In June 2003, the CSA formed a committee known as the Industry Committee on Trade Reporting and Electronic Audit Trail Standards (TREATS Committee), to review the appropriate standards for data consolidation as well as the requirements for an electronic audit trail related to Canadian securities. On July 26, 2004, the TREATS Committee submitted a report providing their recommendations to the regulators.

Also, in April 2004, the regulators selected a consultant to prepare business requirements documentation to identify and further clarify the high-level requirements for the electronic audit system. These high-level requirements formed the basis of a request for information (RFI) that was used to solicit industry recommendations on how best to fulfill the objectives of TREATS from both technical and operational perspectives.

The RFI process officially concluded in December of 2004 with the selection of six candidate vendors who have agreed to participate in a subsequent Request for Proposal. The RFP process will be based on detailed business, regulatory and technical requirements that are currently being developed and documented. It is due in August, with the vendor to be selected by September.

The objective of the first phase of implementation is to activate the system with basic reporting and administrative functionality for exchange-traded equities in the first quarter of 2007. Subsequent phases will involve introducing additional security classes (including exchange-traded options and futures, over-the-counter traded equity securities, fixed income securities, investment fund securities and over-the-counter derivative securities) and enhancing the functional reporting capabilities, internal processes, data structures and administrative capabilities of the system.

Industry involvement in current project initiatives will be assured through a representative Industry Advisory Group to be assembled in April 2005. This group will include industry representatives including some participants from the original TREATS Committee as well as a group of representatives appointed by the regulators to represent dealers, marketplaces, service bureaus and other industry firms and organizations.