Earlier this week, the Investment Industry Regulatory Organization of Canada (IIROC) released proposed amendments to UMIR and its Dealer Member Rules intended to ensure that similar activity that occurs through different forms of third-party electronic access is subject to the same degree of supervision and regulatory oversight. The proposals specifically focus on order execution services (OES), being one of the ways of providing direct electronic access, which also include direct electronic access and routing arrangements.
Among other things, the proposals would (i) require that client IDs be assigned to any OES client that meets certain activity thresholds; (ii) introduce a definition of Manipulative and Deceptive Activities that would clarify dealers' supervision requirements for retail and institutional customer accounts; and (iii) introduce into the Dealer Member Rules a requirement for an OES dealer to consider the inherent risks of third-party electronic order entry and identify and address such risks in its policies and procedures. IIROC also published proposed guidance setting out expectations in regards to the proposed supervision requirements.
As we discussed a few months ago, the CSA's requirements in regards to the provision of direct electronic access are set to come into force on March 1, 2014. IIROC's proposals, which set out a number of specific questions for stakeholders to consider, are open for comment until January 14, 2014. For more information, see IIROC Notice 13-0255 and IIROC Notice 13-0256.
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