The Investment Industry Regulatory Organization of Canada (IIROC) yesterday released its Annual Consolidated Compliance Report for 2011. The report outlines matters that require firm attention, identifies deficiencies identified by IIROC's compliance examination teams over the last year and sets out IIROC's focus for the 2011-2012 examination cycle.
The report begins by identifying a number of matters requiring firm attention, including with respect to notification to IIROC of material changes. Specifically, the report notes that in some instances dealers having made significant changes to business models without informing IIROC prior to implementation.
Meanwhile, common examination deficiencies respecting financial and operations compliance include missing written services agreements in related party transactions and cases in which inaccurate or inappropriate margin rates have been applied. In the case of business conduct compliance, the report identifies a number of deficiencies, including: (i) situations where members with order-execution only services provide clients with "planning tools" that result in recommendations; (ii) policies and procedures that have not been appropriately customized to a firm's business and risks; (iii) inadequate identification of conflicts of interest; (iv) inadequate controls respecting the sale of private placements to accredited investors; and (v) inadequate controls respecting employee accounts.
The report also discusses the focus for the 2011-2012 examination cycle, including client complaints handling, the use of titles and designations, and trading conduct compliance. With respect to the latter, IIROC states, among other things, that it will be conducting reviews of compliance with best execution obligations and dealers' OTC supervision procedures.
For more information, see IIROC Notice 11-0306.
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