CIRO – Rule Consolidation – Phase 5
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CIRO – Rule Consolidation – Phase 5
Letter Summary:
The Canadian Investment Regulatory Organization (CIRO) is publishing for comment Phase 5 of its Rule Consolidation Project rule proposals.
The objective of Phase 5 of the Rule Consolidation Project is to adopt requirements that are common to the IDPC and MFD Rules and have been assessed as having differences deemed to be significant with potential material impacts on stakeholders.
The Phase 5 Proposed DC Rules involves the adoption of rules relating to:
- outsourcing and service arrangements,
- continuing education,
- reporting and handling of complaints, internal investigations, and other reportable matters,
- recordkeeping and client reporting,
- financial solvency,
- client asset use and custody, and
- financing arrangements.
Overview of the Council’s Comments:
The Canadian Advocacy Council (CAC) responded to CIRO Bulletin 24-0276, commending CIRO’s progress on harmonizing regulatory requirements through its Phase 5 rule consolidation project. The CAC emphasized the importance of clear guidance and adequate transition periods to support effective implementation and maintain investor protection.
Highlights of the CAC’s Submission:
- Q1: Supported including prospective clients in the definition of “complaint” to address systemic risks in onboarding and marketing.
- Q2: Recommended clearer guidance on “serious misconduct” and selective inclusion of Dealer-harming behaviour that signals broader risks.
- Q3: Backed the “non-reportable complaints” category but urged clarity on identifying patterns that may require reporting.
- Q4–Q5: Endorsed the 90-day response and internal dispute resolution timeframes as appropriate, encouraging prompt resolution.
- Q6: Supported client reporting harmonization and proposed a post-implementation review after 18–24 months.
- Q7: Opposed extending use of free credit client cash to Level 3 mutual fund dealers due to lower oversight standards.
- Q8–Q9: Approved phased transitions for capital rules (12 months) and auditor requirements (18–24 months).
- Q10: Favoured a hybrid Form 1 schedule model with shared core and dealer-specific supplements.
- Q11: Supported look-through for diversified funds while noting risks in niche or illiquid strategies.
- Q12: Recommended a 12–18 month phase-in for counterparty margin rules.
The CAC affirmed that the DC Rules reflect the project’s objectives without introducing undue burden and praised CIRO’s engagement with stakeholders.