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The Canadian Investment Regulatory Organization (CIRO) has published its 2026 compliance report for dealers (Report), which describes some priorities for CIRO regulated dealers to tackle in order to strengthen their compliance programs and thus investor protection and market integrity.
The Report continues to stress the risk relating to cybersecurity, and notes that CIRO will conduct another cybersecurity tabletop exercise later this year. The need for continuous training for all staff is highlighted to enhance awareness of the risk and reduce the vulnerability to attacks. Although the positive impact that artificial intelligence has had on defensive capabilities through better threat detection was mentioned, the increased use of AI in sophisticated cyber attacks muted some of these positive developments.
AI is also mentioned in the Report in the context of FinOps examinations, where CIRO will be asking dealers about the use of AI in their daily operations, as well as about their operational controls to ensure that the AI is working as anticipated. Dealers are also reminded to consider whether their use of AI is a material business change that would require advance notice to CIRO.
Various trading concerns were also raised involving inadequate policies and procedures to prevent extended failed trades, manipulative trading activity across asset classes and ensuring that the correct client identifiers are included for listed securities.
No report is complete without a reference to the Client Focused Reforms Phase 2 Sweep Report, and dealers are strongly encouraged to review that report against their own internal practices. For BLG's take on the sweep report, please refer to our Insight here. The Business Conduct Compliance (BCC) team expects to focus on whether dealers have taken steps to action any deficiencies described in the report that may be applicable.
The BCC team also noted in its exams that the most common deficiency related to anti-money laundering compliance is the failure by dealers to effectively conduct the required 2-year AML compliance effectiveness review, and that the BCC team will continue to focus on the quality of these reviews moving forward.
Other notable findings in BCC examinations included concerns about supervisory practices particularly with respect to reviewing outside activities for potential conflicts, and client communications through non-approved channels. Issues were also identified with respect to referral arrangements, in that dealers did not conduct effective due diligence prior to onboarding referral parties and did not provide the requisite client disclosure at account opening prior to delivering services.
CIRO dealers should review the Report to help set their own individual compliance priorities in the year ahead.
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