In a bid to help facilitate industry innovation, online investment firms have been given the green light by securities regulators to automate their account opening processes.
The Investment Industry Regulatory Organization of Canada (IIROC) published new guidance today that aims to clarify how order-execution-only (OEO) investment firms can use automation in their processes for opening certain trading accounts.
Among other things, the guidance sets out that firms can use automation to review and approve new account applications, provided they have controls, policies and procedures in place to ensure that the process is operating properly and that regulatory requirements are met (such as those for know-your-client and anti-money laundering).
The guidance applies to rules-based automation, not technology that relies on machine learning or artificial intelligence techniques.
It’s also limited to basic trading accounts that don’t allow trading in riskier, complex products, such as contracts-for-difference, over-the-counter derivatives and sophisticated options trading.
While firms can rely on technology for approving basic trading accounts, IIROC stresses that firms remain accountable for ensuring that its requirements are met. “Such responsibility cannot be abdicated to the technology, such as an algorithm,” it said in a release.
“IIROC supports firms using technology that enhances the client experience and generates operational efficiencies as long as investor protection and market integrity are not compromised,” said Irene Winel, senior vice president, member regulation and strategy at IIROC, in the release.
“Moving forward, IIROC intends to continue to apply flexibility as appropriate and clarify IIROC requirements to help industry participants reduce unnecessary costs and pursue innovative ideas while preserving investor protection and choice,” Winel said.