The process for restructuring frozen non-bank asset-backed commercial paper (ABCP) is not interfering with its regulatory efforts, the Investment Dealers Association of Canada says.

The regulator has published an update on its work concerning the ABCP crisis, noting that it, “has been very interested in the development of the Crawford Committee Pan Canadian restructuring initiative in particular as it relates to ABCP noteholders who are clients of IDA-regulated firms.”

“We have reviewed the plan of compromise filed with the court with regard to the scope of the release. It is our understanding at this time that the terms and conditions of the proposal will not hinder the IDA’s ability to exercise its regulatory responsibilities,” it says. Those responsibilities include reviewing firms’ exposure to ABCP, considering areas for improvement in their internal procedures, and contemplating possible enforcement action.

The IDA reports that its enforcement department is reviewing complaints it has received relating to ABCP sales. These complaints are being considered to determine whether clients were provided with adequate and appropriate information about the risk or the suitability of the products that were sold to them, and if the firm undertook appropriate due diligence, among other things, it says. It has yet to determine whether regulatory disciplinary action is warranted.

The regulator also launched a joint financial and sales compliance sweep focused on the IDA firms involved in the manufacture and/or distribution of non-bank ABCP. “The primary objective of the review is to identify and address areas for systemic improvement such as internal controls, risk management and firm processes relating to product assessment, due diligence and approval, compensation structure, investment suitability, marketing materials and training of salespersons,” it said. “We will determine what follow-up action is required based on the findings of this review and then make our findings public.”

Since the onset of the credit crunch, the IDA has also been monitoring firms’ ABCP exposure as part of its mandate to ensure that firms remain well capitalized.