The Investment Industry Regulatory Organization of Canada yesterday released recommendations and best practices respecting the distribution by dealers to clients of non-arm's length investment products. Such products include those issued by: the dealer itself, an issuer or selling securityholder with which the dealer does not deal at arm's length, or an issuer or selling securityholder to which a dealer is otherwise connected or related.
According to IIROC, dealers are expected to follow a sequence of steps in order to satisfy their obligations in respect of the distribution of non-arm's length products, namely: (i) conducting product due diligence; (ii) completing a conflict of interest assessment; and (ii) assessing client-specific suitability. IIROC also stated that compliance reviews will focus on dealers' written policies and procedures, with the guidance providing a list of particulars expected in written policies.
IIROC originally published for comment draft expectations in February 2010. A summary of comments received, and IIROC's responses, was also published yesterday. For more information, see IIROC Notice 13-0039 and Notice 13-0040.
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