IIROC begins implementation of Client Relationship Model reforms to enhance investor protection

March 26, 2012 (Toronto, ON) – The Investment Industry Regulatory Organization of Canada (IIROC) has received approval to begin implementation of its comprehensive reform package designed to enhance the relationship between investors and their financial advisors. Approved March 22, 2012 by the Canadian Securities Administrators (CSA), the amended rules in the Client Relationship Model (CRM) will be implemented in stages, effective immediately.

IIROC’s CRM reforms provide greater disclosure requirements for advisors and enhance the standards they must meet when assessing the suitability of investments for their clients. The objective is increased transparency for investors surrounding the fees they pay, the services they receive, potential conflicts of interest and the performance of their accounts.

“The Client Relationship Model is an important initiative that will enhance the advisor-client relationship by building on the standard of care required of registered investment professionals and IIROC member firms,” said Susan Wolburgh Jenah, IIROC’s President and Chief Executive Officer.

“We have consulted extensively with many stakeholders in finalizing these reforms and will now turn our attention to ensuring they are effectively implemented.”

The CRM amendments will clarify and strengthen the obligations of advisors to their clients in the following areas:

• improved account relationship disclosure, including more information to investors on account types, the services they can expect to receive, as well as transaction and account fees and charges;
• enhanced suitability assessment standards to ensure investments are appropriate to each investor’s objectives and time horizon, as well as to the composition and risk level of the investor’s overall portfolio. Additional “trigger” events will also require that suitability assessment reviews are conducted more frequently;
• the introduction of enhanced standards for the disclosure and management of existing or potential conflicts of interest between investors and their advisor and/or firm; and
• the introduction of requirements to provide clear information on statements about the cost of investments and the performance of investor accounts.

Details about the timing of implementation of each of these specific areas is included in the IIROC notice, with some elements coming into effect immediately and others transitioned over a two-year period. At the request of the CSA, implementation of the IIROC account performance reporting requirements has been suspended pending any necessary harmonization related to the finalization of equivalent CSA proposals.

IIROC regulates all 213 investment dealers in Canada and their 28,000-plus employees who have been approved by IIROC to work with the investing public. IIROC-regulated firms fund the Canadian Investor Protection Fund to offer protection to clients of IIROC-regulated firms.

Visit the IIROC website at www.iiroc.ca to access IIROC’s Annual Report, investor brochures, Strategic Plan, rules and policy proposals to learn more about IIROC’s efforts to enhance investor protection in the areas of registration, proficiency, compliance, complaint handling, dispute resolution and enforcement.

Related documents:

• Rules Notice: Client Relationship Model - Implementation
• Rules Notice: Client Relationship Model – Guidance
• Rules Notice: Know your client and suitability - Guidance

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IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.

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