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CIRO – Non-tailored Advice in the Order Execution Only Channel
Letter Summary:
The Canadian Investment Regulatory Organization (CIRO) is evaluating the limitation of advice in the order execution only channel.
The do-it-yourself (DIY) investing segment is experiencing significant growth and evolution, with many investors new to DIY investing often relying on nontraditional sources of information and advice. According to the 2024 CIRO Investor Survey, published on June 4, 2024,1 four in ten DIY investors opened their first DIY account within the last three years. The survey also revealed that DIY investors are considerably more likely than other investors to utilize social media, internet forums or financial influencers (Finfluencers) as sources of investing information and advice.
Consistent with CIRO’s strategic objective to enable greater access to advice forming part of the CIRO Strategic Plan FY 2025-2027 published on April 11, 20242 (the CIRO Strategic Plan), they are evaluating whether CIRO investment dealers offering order execution only account services (OEO Dealers) can provide non-tailored advice to meet the needs of DIY investors.
This initiative aims to ensure that such advice does not diminish the value of established, robust advisory channels, thereby preventing any potential confusion between the two. Their objective is to enhance investor protection by ensuring access to high-quality information from verified sources and allowing the use of tools designed to help investors make better investment decisions.
Overview of the Council’s Comments:
The Canadian Advocacy Council of CFA Societies Canada (CAC) recently provided feedback on the Canadian Investment Regulatory Organization’s (CIRO’s) consultation regarding non-tailored advice in the Order Execution Only (OEO) channel. The CAC acknowledged that DIY investing informed by online resources is growing, particularly among younger investors, and supported evolving regulation to better protect investors and focused on keeping activity within the regulatory perimeter.
General Position
- Supported expanding OEO Dealers’ ability to offer non-tailored advice and tools
- Emphasized OEO Dealers must adequately manage new conflicts these services may introduce
- Advocated for principles-based regulation requiring dealers to evaluate tools’ allowance, configuration and promotion based on their net effects on investor behavior, distinguishing between configurable uses of tools by sophisticated investors and base-configured/promoted and suggested uses to most clients