The Investment Dealers Association’s board has approved a by-law amendment concerning employee ownership of securities in other investment firms.

The current rules of the IDA restrict industry investors, including employees and officers of member firms, from owning securities of other firms. If an employee or officer of one firm were to hold securities of another IDA member, it could result in conflicts or perceived conflicts of interest. For this reason, such investments have not been allowed.

The rule has been changed in order to allow dual ownership in certain situations as long as the investment is not significant to either the investor or the member. In some cases percentage ownership may cause concern even where the dollar amounts may appear insignificant. In other situations, the dollar amount may cause concern even when the percentage ownership may seem little. Consequently, the amendments include a combination of percentages of ownership and dollar amounts as a test of significance.

The amendment continues to restrict officers and employees of a member firm from owning securities of another if it may create conflicts of interest or the appearance of a conflict of interest. The amendment makes it clear as to what investments are allowed and reduce the number of situations where the IDA is called on to make a decision relating to permission to invest.