The Investment Industry Regulatory Organization of Canada (IIROC) is re-proposing changes to its rules that set a new limit on dealers using client cash balances.
According to an IIROC notice published Thursday, the amendments aim to strengthen the prudential framework for dealers for safeguarding, and ensuring timely client access to their assets. “The proposed amendments … seek to appropriately restrict a [dealer’s] ability to use client free credit cash balances in the conduct of its business, by reducing the allowable usage ratio,” the notice says.
An earlier version of the proposals also included other changes that IIROC has decided to split off into a separate initiative. This aspect of the original proposal requires further refinement, the notice says, and will be pursued separately. Additionally, IIROC will review the use of credit ratings, and the reference to credit rating agencies in its rules.
IIROC wants to proceed with the amendments to adopt a new limit sooner rather than later, because it is currently relying on dealers’ voluntarily agreement to adhere to the proposed limit, which they’ve done since 2011, “to manage this potential leverage risk.”
Comments on the proposed amendments are due by May 30.