Exemptions granted by CIRO in 2024

1. Exemptions from UMIR provisions granted by CIRO staff

Authority to grant exemptions

Rule 11.1 of UMIR allows CIRO to exempt a particular transaction from UMIR provided that, in CIRO’s opinion, the exemption:

• would not be contrary to the provisions of any applicable securities legislation and the regulation and rules
• would not be prejudicial to the public interest or to the maintenance of a fair and orderly market
• is warranted after due consideration of the circumstances of the particular person or transaction.

1.1 Off-marketplace transactions

CIRO granted exemptions to allow a Participant to complete a trade off-marketplace, either for itself or for a client.

Rule 6.4 of UMIR states that a Participant may not trade or participate in a trade other than through the entry of an order on a marketplace. Rule 6.4 includes a number of exceptions to this broad requirement. However, in circumstances that are not included in the rule, a regulatory exemption is required in order to complete a transaction off-marketplace. In accordance with Rule 6.4(2)(b), CIRO will grant a regulatory exemption:

• in order to maintain a fair and orderly market or
• if it is impractical for the seller, purchaser or their agents to comply with applicable securities legislation.

The following table provides a breakdown of the exemptions CIRO staff granted in accordance with Rule 6.4(2)(b):

1.2 Trading an intentional cross with jitney on one side

CIRO staff granted exemptions to allow the trading of intentional crosses with jitney on one side. The definition of an “intentional cross” in Rule 1.1 of UMIR prohibits Participants from executing an intentional cross while acting for a jitney Participant on one side of the trade. The exemptions were provided as they were considered warranted under the circumstances and would not be prejudicial to the public or the maintenance of a fair and orderly market.

1.3 Trading during a restricted period

Rule 7.7 of UMIR prohibits the trading of certain securities during a restricted period. CIRO staff granted exemptions to allow the purchase of shares subject to Rule 7.7 restrictions.

Exemptions were provided for the execution of unsolicited grouped orders for multiple clients to purchase a restricted security that was arranged prior to the commencement of the restricted period. We were satisfied the exemptions were consistent with the principles of 7.7 and were not prejudicial to the public interest or to the maintenance of a fair and orderly market.

2. Exemptions from IDPC or MFD Rules granted by the Board (or its delegate)

Authority to grant exemptions

IDPC Rule 1302 and MFD Rule 1A permit the Board to exempt a Dealer Member from any provision of the IDPC or MFD Rules, respectively, where the Board is satisfied that to do so would not be prejudicial to the interests of Dealer Members, their clients or the public. In granting an exemption, the Board may impose such terms and conditions as are considered necessary.

In all cases, the Board reserves the right to revoke the exemptions at any time upon notice to the applicant and the exemptions are void upon the date of the implementation of any amendments to applicable and relevant rules by CIRO or the provincial securities commissions (CIRO in its sole discretion, and not the applicant, will determine whether any rule amendments implemented are considered to be applicable and relevant, thereby rendering an exemption order as void).

2.1 Cross-Guarantees

The Board granted an exemption from certain aspects of the requirement in IDPC Rule 2206(3) to execute prescribed cross-guarantee agreements. The rule requires related Dealer Members under common ownership to guarantee each other’s liabilities in amounts equal to the percentage of the Dealer Member’s capital employed that corresponds to the percentage ownership interest held by the common owner. One of the original parties to the agreement was replaced by the parent company who had significantly more capital and was better positioned to provide the required guarantee.

2.2 Dual-Registration

Effective January 1, 2023, with the amalgamation of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada, CIRO introduced rules to permit Dealer Members to become “dual registered” i.e. to operate an investment dealer and mutual fund dealer within a single legal entity. As part of these applications, the Board received and granted exemptive relief from certain IDPC rules, most of which were given to permit the Dealer Member to continue to conduct certain mutual fund dealer business within the dual-registered entity as it would have been approved to do as a mutual fund dealer.

Continuing education requirements for mutual fund dealer representatives in Québec

The Board granted exemptive relief from the continuing education requirements under IDPC Rule clause 2704(2)(ii). The exemptive relief was limited to the Dealer Members’ mutual fund dealing representatives registered in Québec and approved by CIRO under IDPC Rule clause 2551(1)(iii) and the mutual fund dealer representatives’ activities in Québec.

The exemption is conditional on the Dealer Member and the mutual fund dealing representatives complying with the laws and regulations governing mutual fund dealing representatives in Québec, and any other conditions imposed by the applicable securities regulatory authority under exemptive relief from National Instrument 31-103 to permit the application of IDPC Rules to the Dealer Member’s mutual fund dealer activities in Québec.

2.3 Exemption from the control prohibition, a section of the personal financial dealings rules

The Board granted exemptive relief from IDPC Rule clause 3115(2)(v), referred to as the Control Prohibition, which is a section of the IDPC Rules regarding personal financial dealings with clients. The Control Prohibition prohibits employees and Approved Persons from acting as Powers of Attorney, trustees, or executors for a client, or from having control over the financial affairs of the client, unless they are related to that client (and for certain Approved Persons, have received prior approval from their Dealer Member).

The exemption was granted for two arrangements involving Approved Persons acting as executors and trustees for two clients. The clients both worked as senior advisors, and each sought to appoint their longstanding business partner and trusted colleague as one of the co-executors and co-trustees of their estates.

The conditions on the exemptive relief require that the Dealer Member:

• Designate the accounts named in the exemption as non-client accounts,
• Take reasonable steps to ensure the employee or the Approved Person acting as the executor and trustee not receive, accept or keep any remuneration for the appointment, and
• Maintain enhanced supervision of the account(s).

2.4 Exemption related to know-your-client and suitability requirements

The Board approved amendments to an existing relief granted in 2012 to an Investment Dealer Member from IDPC Rule subsections 3209(1) and 3209(2), as well as IDPC Rule section 3406. The exemption allowed for the delegation of know-your-client (KYC) and suitability responsibilities when offering advisory accounts online (computer-based recommendations and suitability reviews, supported by a Registered Representative).

The exemption granted in 2012 was subject to representations and conditions, which the Dealer Member asked the Board to reconsider.

• One of the conditions required the Dealer Member to review client portfolios annually. Given the changing regulatory landscape and the updates to IDPC Rule subsection 3209(4), the Dealer Member applied for an amendment to that condition given that Dealer Members are now required to review KYC information no less frequently than once every 36 months.
• The 2012 relief was conditional on the Dealer Member obtaining approval of non-material changes in which KYC/Suitability information is communicated as a part of the account opening process. The Dealer Member noted that the process was cumbersome, time consuming and disruptive to their business.

CIRO staff supported amending these conditions, which the Board approved.

In addition, the Board also approved the Dealer Member’s petition which:

• Allowed for electronic dissemination of information about their advisory accounts,
• Removed reference to specific hours of availability for the Dealer Member’s Registered Representatives, and
• Removed the provision of “market commentary discussing economic and market updates relevant to a client’s portfolio” from the Registered Representative’s role.

2.5 Exemptions related to corporate officer titles

Under the authority delegated by the Board, the President and CEO of CIRO granted several exemptions to Dealer Members from IDPC Rule clause 3640(2)(ii), which allows certain Approved Persons to use corporate officer titles when interacting with clients despite not being appointed by the Dealer Member to that corporate office.

Under the exemption, the specified Approved Persons may only use the corporate officer titles when interacting with non-individual institutional clients and/or corporate issuer clients. The exemption is also subject to additional conditions, including that: the corporate officer titles in question be based on criteria including seniority and experience, and not primarily sales or revenue generation; controls are in place to monitor the use of corporate officer titles by the Approved Persons identified; and the Dealer Member maintains written policies and procedures to address the application and supervision of these conditions.

2.6 Exemption from trade confirmations and statement of account delivery requirements

The Board granted exemptive relief from delivery requirements for trade confirmations and statements of account for one Dealer Member’s institutional clients in respect of “give up” trades involving futures contracts and futures options, until the enactment of IDPC Rule subsection 3808(11) and IDPC Rule sub-clause 3816(2)(x)(d) of the Derivatives Rule Modernization Project on September 28, 2024.

2.7 Insurance and custody requirements related to crypto asset trading

The Board granted the following exemptive relief as it pertains to trading in crypto assets:

• Exemptions from the requirement under IDPC Rule 4456 to maintain financial institution bond insurance providing coverage for all types of losses specified in that Rule, subject to specific conditions, and
• Exemptions from the requirement under IDPC Rule 4342 that client assets must be held at an Acceptable Securities Location and the requirement set out in IDPC Form 1 that imposes a capital penalty equivalent to 100% of the market value of the assets held at any non-Acceptable Securities Location, subject to specific conditions.
• Exemption from the requirement under IDPC Rule 4455 to maintain mail insurance that covers 100% of losses from any outgoing shipments of negotiable or non-negotiable securities by registered mail.

For information on the rationale for providing the exemptions and the related conditions, please refer to CIRO Member Bulletin 24-0383 and CIRO Member Bulletin 25-0013.

2.8 Fully paid securities lending program

The Board extended the exemptive reliefs granted to five Dealer Members from the requirement to maintain client financing accounts separate from securities trading accounts as mandated under IDPC Rule clause 4603(3)(ii) and the requirement to provide out of the Dealer Member’s capital the market value deficiency on the additional collateral set aside for clients as mandated under the Notes and Instructions to Form 1, Part II, Schedule 1 (Lines 4, 8 and 12).

These exemptive reliefs have been extended until the earlier of the following:

1. the implementation of Corporation rules related to fully paid lending;2
2. December 31, 2025.

For information on the rationale behind the exemptive reliefs and the applicable conditions, please refer to GN-4600-22-001 Guidance on fully-paid securities lending programs.

2.9 Reporting requirements for a resigning Dealer Member

The Board granted exemptive relief to a resigning Dealer Member from the requirement to file with CIRO:

• a balance sheet of the Member reported by the Member’s auditor without qualification, indicating that the Member has liquid assets sufficient to meet all its liabilities other than subordinated loans, if any, in accordance with MFD Rule 8.3.1.1; or
• a report from the Member’s auditor without qualification that the Member has liquid assets sufficient to meet all its liabilities other than subordinated loans, if any, and a report from the Member’s auditor that the Member is in compliance with the Rules with respect to holding client cash, securities and other property, in accordance with MFD Rule 8.3.1.2.

The exemption was granted because the resigning Dealer Member’s related company acquired all its assets and provided a Letter of Undertaking to accept responsibility for all outstanding liabilities of the resigning Dealer Member.

3. Exemptions from IDPC or MFD rules granted by CIRO staff

3.1 Bulk account movements

CIRO staff granted bulk transfer exemptions pursuant to IDPC Rule section 4866 in 2024. Under IDPC Rule section 4866, CIRO staff may provide exemptions related to bulk account movements in specified circumstances where we are satisfied that doing so would not be prejudicial to the interests of the public, the Dealer Member or its clients. Where appropriate, CIRO staff may also impose terms and conditions on the relief granted.

Additionally, an MFD made an application to acquire all of the client assets of another MFD through a bulk account movement. Relief from the account opening requirement timelines was granted under CIRO By Law No. 1, section 3.10.

3.2 Branch manager proficiency requirements

CIRO staff granted exemptions from the branch manager requirements pursuant to MFD Rule 2.5.6 in 2024. Under MFD Rule 2.5.6, CIRO staff may provide exemptions related to branch manager proficiency requirements in circumstances where we are satisfied based on the individual’s experience that their knowledge and proficiency remains relevant and current.

4. Exemptions from proficiency or continuing education requirements granted by CIRO staff

4.1 Background and authority to grant exemptions

A Dealer Member may apply, on behalf of an individual, to CIRO for an exemption from the proficiency requirements3, or for an extension of or exemption from a continuing education requirement4.

An individual wishing to work at an investment dealer as an Approved Person must obtain registration and approval. One of the three criteria used to assess whether an individual is, or remains, “fit and proper” for approval is proficiency (the other two being integrity and solvency). Applicants must meet CIRO’s minimum education, training and experience requirements to satisfy the proficiency criteria.

Under the IDPC rules, CIRO has the authority to exempt individuals from a proficiency requirement, including the requirement to write or rewrite any required course, as CIRO considers appropriate. This may involve terms and conditions in some cases. In any proficiency exemption application, the onus is on the applicant to demonstrate that their experience and education is an acceptable alternative to the required proficiency.

4.2 Proficiency and continuing education exemptions

In 2024, CIRO staff approved exemptions and extension requests related to proficiency or continuing education requirements5.

The majority of applications for proficiency exemptions related to the following courses:

• Canadian Securities Course (CSC)
• Wealth Management Essentials (WME)
• Conduct and Practices Handbook Course (CPH)
• Partners, Directors and Senior Officers Course (PDO), and
• Limited extensions from post-approval requirements to write the CSC and CPH courses were granted to individuals in the context of their sponsoring firm’s pending registration application

• Proficiency exemptions were also approved for the Derivatives Fundamentals and Options Licensing Course, Investment Dealers Supervisor Course, Chief Compliance Officers Qualifying Examination, Chief Financial Officers Qualifying Examination, and the 90-Day Training Program.
• CIRO staff approved exemptions from having to rewrite the CSC, WME, CPH and PDO courses because the validity of the course had expired. In all instances, the applicants were able to demonstrate that their industry experience and education were an acceptable alternative to rewriting the applicable course.
• CIRO staff approved exemptions from having to write the CSC, WME, CPH and PDO courses. These applicants demonstrated that they had extensive industry experience and qualifications equivalent to the competencies covered in the applicable course.
• CIRO staff approved extension requests for the WME. Applicants sought an extension to their post-approval due date as they had extenuating circumstances or demonstrated hardship that prevented them from completing the WME by their required post-approval date.

• 2CIRO has proposed amendments to IDPC Rules and IDPC Form 1 relating to fully paid securities lending and financing arrangements. For information on the proposed amendments, please refer to CIRO Rules Bulletin 24-0067.
• 3Proficiency requirements under IDPC Rule 2600.
• 4Continuing education requirements under IDPC Rule 2700.
• 5In addition to the exemptions and extensions related to proficiency or continuing education requirements, CIRO staff also approved submissions related to whether individuals’ experience or qualifications were acceptable under IDPC Rule 2600.