Reps with bank-owned dealers that sell principal-protected notes (PPNs) must do so through their investment dealer, the Investment Industry Regulatory Organization of Canada (IIROC) says in new guidance.
IIROC Tuesday issued new guidance that sets out its expectations for the distribution of PPNs by IIROC registered reps.
The guidance notes that if a dually-employed rep — a rep that works for both a bank-owned dealer, and the affiliated bank — sells a PPN to a client, this “could create client confusion” as to whether they are dealing with a financial institution or an IIROC dealer; and, would result in the application of the know your client (KYC) and suitability protections that is entirely dependent on the distribution channel.
As a result, IIROC says that its view is that all sales of PPNs by an IIROC-registered individual “must be transacted solely in their capacity as an employee or agent of the dealer”.
Therefore, the regulator says that it expects all dealers to have policies and procedures in place to ensure that PPN sales take place through the dealer, and for there to be adequate supervision and compliance oversight of this to ensure compliance with KYC and suitability obligations.