fintech and blockchain icons on financial technology background

Evolving artificial intelligence offerings. the ambiguous nature of cryptocurrencies. Industry innovation means regulators have their work cut out for them – and compliance officers (COs) want them to make decisions.

COs from across the industry recognized there is evolving regulation of emerging technologies, but many called for more action in the 2019 Regulators’ Report Card.

This is the second year COs and other regulator-facing executives were asked to rate the “regulator’s effectiveness in facilitating or supporting industry innovation.” Responses led to increased ratings for the provincial regulators in Quebec and Alberta, with both coming in with ratings of 6.1, and for the Mutual Fund Dealers Association (MFDA) at 6.4.

Just as in 2018, the B.C. and Ontario provincial regulators rated highest with 7.7 and 6.6, respectively. The Investment Industry Regulatory Organization of Canada (IIROC), however, fell to the bottom of the pack in the innovation category, tumbling from 6.2 to 5.5 year over year.

Speaking specifically about IIROC, one CO from an investment dealer in Ontario says they “hear about [innovation efforts], but don’t see [the regulator] reaching out. [I’m] still waiting on the actions from IIROC about participation and guidance.”

Compliance executives also bemoaned an over-reliance on paper forms, a lack of perceived interest in finding new ways to help the advisor and, when IIROC did share information, the overemphasis on privacy and cybersecurity.

“[It’s] slowly getting better,” says another Ontario-based investment management firm’s CO. IIROC is “only doing things when they get pulled into it. [They] tried to ignore crypto, and it resulted in a difficult situation.” The CO continued by saying the self-regulatory organization (SRO) wasn’t very proactive.

A March 2019 report that IIROC worked on with Accenture Consulting, “Enabling the Evolution of Advice in Canada,” addressed these issues by examining why and how the current regulatory framework needs to be adjusted. “What we decided to do was try and understand where the industry is going [and] how [firms] are trying to change themselves to meet the needs of investors,” says IIROC president and CEO Andrew Kriegler. “You can’t, or shouldn’t, look at a rule in isolation and say, ‘We’re just going to change that.’ You need to know if [doing] that would have long-term effects, [or] any unintended consequences in the system.”

In terms of concrete actions, Kriegler said the SRO will now permit electronic signatures, a move detailed in guidance issued Mar. 26. He added that IIROC is also looking at how it can help firms improve the delivery of financial services via automation and tools like digital advisor/client portals.

The MFDA, too, has been taking steps to facilitate innovation. Many of the Report Card respondents said they were particularly impressed with the MFDA’s approach to cybersecurity, which has included a 2017 survey of dealers and the rollout of a program to help firms mitigate tech-related risks. (See Big concerns for small firms and MFDA the higher-rated SRO.)

In other areas, there was ambiguity. “Are there rules changing to address new innovation? Yes,” says an Ontario-based fund dealer CO, “[but] they’re being reactive.” A Quebec-based dealer CO agreed the MFDA was interested in adopting new technology but also said the SRO was confused about next steps.

Meanwhile, the B.C. Securities Commission (BCSC) says that it’s focused on “a wide array” of developments and that it’s working with Canadian Securities Administrators and global financial regulators, according to a statement emailed to Investment Executive (IE).

On the topic of cryptocurrencies, for example, the provincial regulator is “engaged in ongoing consultation with stakeholders” and is enforcing breaches of B.C. securities laws by any entities where the rules apply, “including cryptoasset trading platforms,” says Mark Wang, director of capital markets regulation at BCSC, in the statement. He adds the rules for digital wealth advisors are no different from those for traditional firms, as the “regulatory regime is intended to be technology neutral.”

The B.C. regulator is keeping its options open: “To the extent that advancements in AI, increased use of open banking or any other innovations occur, we will review and ensure that the regime is a flexible one that continues to protect investors,” says Wang.


For the first time this year, we spoke to compliance officers and legal representatives at digital wealth managers to find out whether their concerns differ from the wider pool.

Respondents from the interviewed companies consistently said that provincial regulators were interested in learning about and collaborating with new ventures, and that they understood the challenges of making rules for new technologies. The respondents also acknowledged the increasing role IIROC is taking in regulating the fintech space, but mentioned that the SRO has a lot of catching up to do.

Though some of the respondents said they had benefited from forward-thinking efforts to reform regulations, others said it was time for the industry to evolve beyond test cases.