IIROC Consultation Paper (Phase II) - Competency Profiles for Directors, Executives, Ultimate Designated Persons, Chief Compliance Officers, and Chief Financial Officers

February 3, 2022

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IIROC Consultation Paper (Phase II) - Competency Profiles for Directors, Executives, Ultimate Designated Persons, Chief Compliance Officers, and Chief Financial Officers

Letter Summary:

The consultation is in the second phase of a multi-year project (to 2024) to set out competency profiles for all of IIROC’s registration categories. A “competency” is a set of knowledge, behaviour, and skills that an individual must have to perform effectively in their role. The purpose of the competency profiles is to provide a benchmark to evaluate course providers, provide educational providers with guidance on course content and allow dealers to better understand expectations. The proposed profiles for directors, executives and UDPs are similar, and consist of four categories of high-level competencies related to the general regulatory framework, corporate governance and ethics, duties, liabilities and defences and risk management and oversight. There are also a number of sub-competencies, including a few directed solely at the UDP. In addition to the general competencies set out above applicable to all executives, CCOs would be subject to an additional 5 categories of high-level competencies, including related to the compliance function and operations, risk management and regulatory reporting, examinations, investigations, and actions, along with 12 sub-competencies. A CFO would be subject to the highest number of competency profiles, as in addition to those that apply to all executives, a CCO would be subject to 7 more categories of high-level competencies, including with respect to capital adequacy, books and records and reporting, credit risk management and customer accounts, and inventory, pricing of securities and underwriting, as well as 31 sub-competencies within those broader categories.

Overview of the Council’s Comments:

The CAC continues to support efforts to modernize the proficiency expectations and competency profiles for all registrant categories, especially given the rapid pace of change in the industry. While the CAC agrees directionally with the competencies set out in Phase II, many of them are missing specific additional requirements with respect to knowledge of the end-users of a dealer’s services and continuous professional development related to innovative products and services, which we believe IIROC understands well within different regulatory functions.

The CAC is concerned that some of the competency profiles might be seen by some dealer members for these categories as containing only keywords for a “check the box” exercise related to building proficiency, rather than as the necessary elements of a more holistic approach.

The CAC is disappointed that the framework does not appear to contain many forward-looking or systemic risk-related considerations particular to these roles and appears to contemplate an orientation towards the status quo. There is no explicit reference to the ongoing evolution of financial services such as the innovation occurring in fintech and crypto-asset offerings. Further, given the focus of issuers and investors on diversity, equity, and inclusion (collectively “DEI”), ESG and climate-related matters, and Indigenous matters (such as some knowledge of TRC Call to Action 92 and UNDRIP, along with their attendant legislative and regulatory recognition and implications), the CAC was surprised that knowledge of these and future foreseeable developments were not included in the required profiles.

The CAC reiterated our general comment made in our earlier letter that there are personal ‘soft’ skills that are important and applicable to all registration categories. CFA Institute has its own competency framework which is used to inform ongoing professional development and that we believe could inform the ongoing competency profile work of this project. These include items such as collaboration, communication, curiosity, and leadership, which all could be considered.