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The Canadian Investment Regulatory Organization (CIRO) has been consolidating the rule sets for investment dealers and mutual fund dealers for the past several years, and has now republished the Proposed CIRO Rules, which are intended to create a single set of rules applicable to all CIRO Dealer Members. The proposed CIRO Rules incorporate feedback from the previously published five phases of the Rule Consolidation Project and propose both material and non-material changes to improve clarity and address stakeholder comments.
It should be noted that the CIRO Universal Market Integrity Rules are not being consolidated with other CIRO Rules as part of this project and will continue as a separate set of rules.
The Proposed CIRO Rules cover several topics, including Dealer Member organization, business conduct, client accounts, financial and operational matters, and procedural rules for enforcement. The proposals also incorporate several changes related to the new proficiency model for investment dealer Approved Persons that came into force at the beginning of the year. Of particular interest to Mutual Fund Dealer Members, CIRO intends to apply the IDPC Proficiency Model to the corresponding categories of Mutual Fund Dealer Member Approved Persons. While there will be some exceptions, such as Registered Representatives dealing in mutual funds only, and Chief Compliance Officers (CCOs), other categories will be impacted. This includes Mutual Fund Dealer Member Directors, Executives, Chief Financial Officers (CFOs), Ultimate Designated Persons (UDPs) and Branch Managers (as Supervisors). As a result, Mutual Fund Dealer Members should pay particular attention to these requirements.
Despite mixed reactions, no changes were made with respect to previously published proposals relating to the general requirements for CFOs across investment dealers and mutual fund dealers. CIRO notes that Dealer Members can request exemptive relief from the CFO requirements to CIRO's Board, and that if these requests are successful, CIRO may re-evaluate if a threshold for exemptive relief should be included directly in the CIRO Rules.
CIRO did indicate its intention to minimize the need for existing Approved Persons of Mutual Fund Dealer Members to reapply for Approved Person status under the Proposed CIRO Rules, and that further details will be included in the final implementation bulletin.
Some of the other material changes made to the proposed CIRO Rules include:
- Narrowing of the term "investment product" from one that included securities, derivatives, precious metals bullion and "other products designated by the CIRO board" to remove the latter category;
- Adding a rule in the standards of conduct section requiring Dealer Members to pay annual membership fees and other fees as established by the CIRO Board;
- Lengthening the required minimum notice period regarding changes to Dealer Members or their business activities from 20 days to 30 days;
- Adopting provisions requiring that the use of trade names be compliant with all applicable laws and giving CIRO staff the ability to grant relief from trade name ownership requirements in appropriate circumstances;
- Allowing Approved Persons who are also employees employed by a credit union to receive consideration from the credit union, provided certain conditions are met; and
- Removing "prospective clients" from the definition of "complaint."
An 18-month implementation period is generally proposed, with immediate implementation for certain procedural enforcement rules and extended periods for other requirements, such as a 2-year implementation period for Mutual Fund Dealer Members to have a qualified CFO. Similarly, as it is proposed that the same proficiency requirements will apply to Approved Persons across Dealer Members (except for certain carve-outs described above), Mutual Fund Dealer Members' Approved Persons will have a 2-year period to complete these requirements. It is anticipated that existing Approved Persons of Mutual Fund Dealer Members will generally be granted legacy status from new proficiency requirements, except conduct training. Other extended time periods include a 2-year period for Mutual Fund Dealer Members to have an approved panel auditor.
CIRO seeks further comments on the implementation approach, proficiency requirements, and potential impacts on Mutual Fund Dealer Members by June 12, 2026. We continue to encourage all CIRO Dealer Members to carefully consider the impact of the CIRO Rules on their specific business models and provide comments on the consultation.
Firms should review these proposals alongside CIRO's proposals to retire the dual registration rules (see article below). Additionally, we are all waiting for the final publication of CIRO's incorporated advisor rules which are anticipated this spring. Taken together, this triptych of changes is likely to result in material impacts on dealers. Stay tuned for BLG's upcoming Webinar on implications arising from the CIRO incorporated advisor rules, with more details to follow shortly.
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.
