The Investment Industry Regulatory Organization of Canada (IIROC) granted a host of exemptions to investment dealers and reps last year on issues such as proficiency, registration and personal financial dealings.
Exemptions Granted by IIROC in 2017, which was published on Tuesday, provides a summary of the exemptions granted by the self-regulatory organization’s (SRO) board of directors, its district councils or IIROC staff.
For example, IIROC’s board granted exemptions, to 15 dealers, from the rules regarding personal financial dealings with clients, such as serving as a client’s executor, trustee or power of attorney (POA). These exemptions, which covered 36 arrangements between reps and clients, included cases that involved deceased clients and mentally incapacitated clients, where revising existing arrangements would be costly and complicated. The IIROC board also granted exemptions in cases in which the clients are extended family or close friends, or are themselves advisors.
These exemptions generally were granted with certain conditions, the report notes, including that the client accounts are managed by an independent rep, the rep is not compensated (directly or indirectly) for acting as POA, trustee or executor, and the accounts are under enhanced supervision.
The SRO’s board granted an exemption to one dealer to allow certain reps that are registered as both mutual fund reps and exempt-market dealer reps to continue to trade and advise in exempt-market securities after transferring to the IIROC platform. This exemption was subject to conditions, including a 270-day transition period to complete the proficiency requirements, and 18 months to complete the training requirements.
IIROC staff also granted four bulk transfer exemptions stemming from dealers acquiring other dealers.
The report provides a summary of the exemptions from proficiency requirements that were granted last year. Overall, IIROC received 324 proficiency exemption applications in 2017. Of these, 40 exemption requests were withdrawn, either because the exemptions were not required or because IIROC staff recommended that the request be refused. In two cases, in which IIROC staff recommended that an exemption be denied, the application continued and the district council agreed with the recommendation to refuse the request.
“In all cases where staff recommended refusal, the applicants were not able to demonstrate that their education or experience was equivalent or relevant to the proficiency requirement for which they requested an exemption,” the report states. “The majority of the exemption requests where refusal was recommended related to writing or rewriting the [Partners, Directors and Senior Officers Course], the [Investment Management Techniques Course], the [Portfolio Management Techniques Course], the [Wealth Management Essentials Course] and the Conduct and Practices Handbook.”
Decisions on requests for exemptions from proficiency requirements rose by 2.9% over 2016, the report states. It attributes the increase to several factors, including: fewer applications being withdrawn; more applications that successfully demonstrated equivalency; and an increase in reps seeking to conduct discretionary portfolio management activities and pursuing exemptions from the expiry of courses leading to the chartered investment manager designation.