The Investment Industry Regulatory Organization of Canada last month released its annual compliance report for 2012. The report, intended to help dealers comply with regulatory expectations, outlines common deficiencies found in IIROC staff's compliance examinations in the last year, and also sets out IIROC's examination priorities for the current fiscal year.
Specifically, the report outlines a number of deficiencies identified pursuant to IIROC's targeted compliance reviews and surveys. Highlighted issues include (i) non-compliance with aspects of IIROC rules regarding the handling of client complaints; (ii) inadequate internal controls; (iii) deficiencies regarding books and records, including with respect to control and access over customer records on brokerage accounting systems located on affiliates' computer servers and failures to capture and record off-book transactions; (iv) deficiencies in respect of related party transactions, including failures to execute written cost or service-sharing agreements that identify services provided and method of fee calculation; (v) deficiencies regarding policies and procedures for identifying and managing conflicts of interest; (vi) inadequate policies and procedures regarding due diligence; (vii) malfunctions or programming errors related to automated trading systems causing market disruptions; (viii) failures in providing timely responses to trade inquiries, particularly in relation to clients with direct market access; and (ix) inadequate controls over primary distribution of debt.
Meanwhile, for 2012-2013, the report states that IIROC staff intend to focus on issues such as non-arm's length investment products, know-your-client documentation, order-execution only services, capital and liquidity risk management, outsourcing, IFRS, electronic trading controls and extended failed trades reporting.
For more information, see IIROC Notice 12-0359.
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