Canada: IIROC Releases Final Guidance For Enhanced Underwriter Due Diligence Of Public Offerings

On December 18, 2014, the Investment Industry Regulatory Organization of Canada (IIROC) released its final Guidance Note 14-0299 (the Guidance), which sets out suggested principles and practices that should be followed by Dealer Members conducting due diligence in public securities offerings. Although IIROC has made some clarifications in the Guidance, the structure, substance and content are generally consistent with what it proposed in March 2014 when it published an initial draft for comment. IIROC's stated intention with the Guidance is to promote more consistent and enhanced underwriting due diligence by Dealer Members.

The Guidance describes common due diligence practices and suggestions for Dealer Members involved as underwriters of public offerings by setting out and discussing in detail nine "principles" and for each principle, some suggested practices:

  1. Dealer Members should have written policies and procedures in place relating to the underwriting process, with effective oversight of these activities. Effective due diligence is said to constitute going beyond prescriptive checklists alone, as such an approach is considered to be superficial and often incomplete.
  2. Dealer Members should have appropriate due diligence plans that reflect the context of the offering and the level of due diligence that will be reasonable in the circumstances.
  3. Due diligence "Q&A" sessions, available to the full syndicate, should be held at appropriate points, which sessions should be reflected in the applicable due diligence plan. Appropriate follow up should be conducted.
  4. Business due diligence should be performed to ensure the Dealer Member understands the business of the issuer and the key internal and external factors affecting the issuer's business. Dealer Members should determine whether and when certain material facts should be verified independently. Red flags should be identified and dealt with appropriately, which may mean consideration of additional prospectus disclosure.
  5. Underwriters' legal counsel may perform supervised legal due diligence, but matters that pertain to business due diligence should be reviewed by representatives of the Dealer Member.
  6. Reliance on expert opinions is a contextual determination and Dealer Members should take into account the qualifications, expertise, experience, independence and reputation of the expert in order to decide whether or not to rely on the expert's report or opinion.
  7. Syndicate members are each subject to the same liability under securities legislation and should satisfy themselves that the lead underwriter has adequately carried out the required due diligence investigation.
  8. Each Dealer Member that is part of a syndicate should document the due diligence process to demonstrate compliance with its policies and procedures, IIROC requirements and applicable securities laws.
  9. A Dealer Member's execution of the prospectus certificate signifies that it has participated in the due diligence process through appropriate personnel and internal processes consistent with such member's IIROC required compliance framework. This reinforces the need for a comprehensive and effective supervisory framework to ensure compliance with policies and procedures, IIROC requirements and applicable securities laws.

IIROC suggests that underwriters should view the principles and the common practices set out in the Guidance in light of the contextual factors of their business and each offering. IIROC acknowledges that due diligence is a fluid and evolving process and that the principles and common practices may not be applicable or appropriate in all cases. Underwriters must not put "form over substance" and IIROC expects Dealer Members to exercise professional judgment to determine the appropriate level of due diligence in each set of circumstances.

In response to comments submitted in respect of the March draft Guidance, and in particular, concerns that the Guidance may create new requirements in respect of what constitutes a "reasonable" due diligence investigation, IIROC reiterated that the Guidance (i) describes common practices and suggestions which may not be relevant or appropriate in every case, (ii) is not intended as a minimum or maximum standard of what constitutes reasonable due diligence, and (iii) does not, and is not intended to, create new legal obligations or modify existing ones. IIROC believes that the Guidance identifies only appropriate matters as being mandatory and that many of the statements concerning Dealer Members' policies and procedures are appropriately prescriptive with ample room for Dealer Members to reflect the contexts of their businesses and the offerings. IIROC suggests that the level of detail included in the Guidance is provided in order to deliver practical guidance on the subject.

The Guidance was prepared specifically in relation to the participation of Dealer Members in public offerings, a fact that was further clarified in the final version of the Guidance. IIROC has agreed that different considerations apply in respect of Dealer Members' participation in private placements.

The Guidance has been provided to promote more consistent and enhanced underwriting due diligence by Dealer Members. Despite the multiple references in the Guidance to the contextual nature of underwriter due diligence and the hesitation to refer to due diligence "standards", more robust due diligence processes should be expected. Dealer Members will have to review their policies and procedures in light of the Guidance, which IIROC has indicated will inform its compliance reviews of Dealer Members. It is obvious that IIROC intends for Dealer Members to significantly enhance their compliance procedures and written policies and procedures around due diligence practices for public offerings. This can be expected to impact on a Dealer Member's compliance program, including the duties of and oversight provided by the Chief Compliance Officer and UDP of the Dealer Member.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.