Modernization of requirements for account transfers and bulk account movements (IDPC Rule 4800 and MFD Rule 2.12)

1. Matter

A client service disruption can occur where a client decides to move their account from their current dealer (delivering dealer) to a new dealer (receiving dealer) and it takes an extended period of time for the client’s account positions to move between the two dealers. While improving the timeliness of account transfers is primarily an issue of expanding the availability of and dealer access to additional and more highly automated account transfer facilities/protocols, we’ve also identified a number of improvements that can be made to modernize CIRO’s account transfer rule requirements. These improvements include amending the rule requirements to:

• enable CIRO to approve the dealer use of a broader number of automated account transfer facilities
• specify that firms must electronically communicate with each other where a recognized account transfer facility with electronic communication capabilities is available to do so, even in cases where the investment products being transferred cannot be transferred through the facility
• clarify and reorder the account transfer process steps to ensure that clients are adequately consulted early on in the account transfer process and to help improve the timeliness of account transfers
• more precisely specify the time to complete important individual account transfer steps relating to the transfer process (i.e., providing the receiving dealer with an account cash balances and positions list, informing the client of impediments relating to the pending account transfer, commencing the account transfer process once impediments have been resolved with the involvement of the client, and overall time to complete account transfer)

2. Background

Current requirements for account transfers

The current regulatory requirements for account transfers are outdated, inconsistent and are currently only being applied to a small subset of firms within the investment services sector. Specifically, the only current regulatory requirements we are aware of that specifically relate to account transfers are those set out in:

• CIRO Investment Dealer and Partially Consolidated (IDPC) Rule 4800, Part A
• CIRO Mutual Fund Dealer (MFD) Rule 2.12

IDPC Rule 4800, Part A

The main provisions within IDPC Rule 4800, Part A were implemented by the Investment Dealers Association of Canada (IDA) to support the launch of the CDS Clearing and Depository Services Inc. (CDS Inc.) Account Transfer Online Notification (ATON) service early in the year 2000.1The focus of the rules at that time was to require investment dealers to use the ATON service and to require that account transfers be completed within 10 clearing days. There were expectations at the time that the types of account positions that could be transferred using the service and the number of service users would be significantly expanded over time. This has not occurred to any significant degree.

MFD Rule 2.12

MFD Rule 2.12 is a principles-based rule that requires that the firms involved in the account transfer “act diligently and promptly in order to facilitate the transfer of the account in an orderly and timely manner”.

Other rule requirements

We are not aware of any other requirements within the Canadian investment services sector that specifically relate to account transfers.

3. Analysis and discussion

Issues relating to current account transfer rules and account transfer environment

The lack of an updated, complete and consistent standard that applies to all account transfers, and the failure to develop technology solutions to support the standard, has resulted in an account transfer environment that continues to rely too much on manual processes and related bespoke timelines to facilitate account transfers.

From a rulemaking standpoint, the rules that apply to account transfers in the Canadian investment services sector are:

• outdated, because:
  • in the case of the IDPC Rules they assume that one transfer facility will be capable over time of providing timely and efficient account position transfer services for all account position types and all investment services sector participants (i.e. both intermediaries and investment product manufacturers) and this has not occurred nor is likely to occur
  • in the case of the MFD Rules they do not specifically require the use of electronic communications to facilitate an account transfer
• incomplete, because:
  • not all account positions can currently be transferred in an automated manner (refer to footnote on previous page for discussion of ATON)
• inconsistent, because:
  • the standards that apply to investment dealers and mutual fund dealers are different and no specific standards apply to other participants in the Canadian investment services sector

While it is important to acknowledge that rule amendments alone will not facilitate improvements in the timeliness and efficiency of account transfers, we believe they are necessary:

• to facilitate the introduction of technology solutions that result in a more consistent and timely client account transfer experience across investment dealers and mutual fund dealers, and
• to encourage other regulators to adopt them as harmonized standards for the rest of the Canadian investment services sector.

4. Proposals

4.1 Proposed rule amendments to address Issues relating to current account transfer rules

To ensure that the updated CIRO account transfer requirements can be implemented on a timely basis:

• amendments have been proposed to the existing IDPC Rules and MFD Rules to harmonize the account transfer requirements (clean versions are set out within Appendices 1A and 1B; blackline versions are set out within Appendices 2A and 2B)
• these same harmonized requirements will be adopted within the final proposed Dealer and Consolidated Rules at a later date when they are ready for implementation

The following rule amendments have been developed to address the above issues and to clarify the CIRO account transfer requirements:

• introduce a definition for the term “positions” to clarify that the scope of positions that are to be transferred pursuant to a client-initiated account transfer request includes positions where the firm is the “dealer of record”2 and positions held or controlled by the firm for the client3,4
• to expand the types of organizations that may be approved by CIRO to enable more timely account transfers:
  • rename the defined term “recognized depository” as “recognized account transfer facility”,
  • revise the definition for the renamed “recognized account transfer facility” term to expand the scope of parties that would be permitted to provide automated account transfer services, provided these parties meet approval conditions maintained by CIRO5, and
  • replace all references to “CDS’s account transfer facility” with reference to a “recognized account transfer facility” throughout the account transfer requirements6
• clarify that dealers must electronically communicate with each other regarding account transfers where a recognized account transfer facility is available, even in cases where not all investment product positions being transferred can be transferred through the facility7
• to ensure that clients make a fully informed decision regarding their requested account transfer, require that:
  • the receiving dealer inform the client of:
    • all transfer impediments at the delivering dealer and receiving dealer,
    • the client’s options for resolving these impediments, and
    • the impacts of each impediment resolution option
      within 2 clearing days (reduced from 10 clearing days) after receipt of the account’s cash balances and positions list,
      and
  • obtain client instructions on the option to pursue to address each impediment in advance of the client being asked to make a final decision on how to proceed with their account transfer request8

4.2 Proposed corollary rule amendments to address issues relating to current bulk account movement rules

The following proposed corollary rule amendments have been developed to clarify when the client-initiated account transfer rules apply and when the firm-initiated bulk account movements apply and to clarify each party’s obligations:

• clarify the scope of application of and the defined terms used within IDPC Rule 4800, Part B.1 and IDPC Rule 4800, Part B.2 to more clearly delineate between the requirements for: (1) account transfers initiated by clients (Part B.1) and (2) bulk account movements initiated by Dealer Members9
• introduce new principles-based requirement for all investment sector firms involved in a bulk account transfer to “make reasonable effect to ensure prompt movement of accounts”

5. Impacts of the proposed amendments

5.1 Impact analysis of proposed rule amendments

We have assessed the near-term and longer-term impact of the proposed account transfer rule amendments. The longer-term assessment was considered important to perform for this project as it is intended/believed that implementation of these rule amendments:

• will help foster the introduction of technology solutions/protocols to more fully automate the account transfer process
• may lead to their adoption by other Canadian regulators as an investment services sector standard

The following table summarizes the near-term and longer-term assessed impact of the proposed account transfer rule amendments on stakeholders:

Further details of this analysis are included within Appendix 3.

5.2 Regional impacts

We have identified no regional impacts associated with the proposed rule amendments.

6. Alternatives to rule proposals considered

We considered the adoption of a principles-based account transfers rule but to support the Dealer Member desire adopt more specific rules and timelines as part of a harmonized account transfer process and timelines standard, we decided a prescriptive rule approach was needed.

7. Policy development process

7.1 Regulatory purpose

We took the public interest into consideration when developing the proposed rule amendments and we believe the proposals achieve their intended objective of facilitating improvements in the timeliness and efficiency of account transfers.

We also believe the proposed rule amendments will foster public confidence in capital markets by ensuring all CIRO Dealer Members will be held to standards of conduct that foster fair, equitable and ethical business standards and practices.

7.2 Regulatory process

The Board of Directors of CIRO (Board) has determined the proposed rule amendments to be in the public interest and on June 18, 2025, approved them for public comment.

We consulted with the following CIRO advisory committees on this matter:

• the Investor Advisory Panel
• the Account Transfers Working Group of the FOAS Operations Subcommittee

After considering the comments received in response to this Request for Comments together with any comments of the CSA, CIRO staff may recommend revisions to the proposed rule amendments. If the revisions and comments received are not material in nature, the Board has authorized the President to approve the revisions on CIRO’s behalf and the revised proposed rule amendments will be subject to approval by the CSA. If the revisions or comments are material, CIRO staff will submit the proposed rule amendments, including any revisions, to the Board for approval for republication or implementation, as applicable.

7.3 CIRO advisory committee feedback

We have received overall positive feedback from our advisory committees on the proposed rule amendments except:

• a few concerns were expressed about the proposed shortened timeline to identify and inform the client of transfer impediments10

8. Implementation

An implementation date will be determined closer to the date these rule amendments are approved for implementation. The implementation date chosen will take into consideration any implementation issues raised in response to this public comment request, along with the need to improve to timeliness of account transfers as soon as is feasible.

9. Questions

While comment is requested on all aspects of the proposed rule amendments, comment is also specifically requested on the following questions:

10. Appendices

Appendix 1 - Clean copies of proposed rule amendments

• Investment Dealer and Partially Consolidated Rules [Appendix 1A]
• Mutual Fund Dealer Rules [Appendix 1B]

Appendix 2 - Blackline copies of proposed rule amendments

• Investment Dealer and Partially Consolidated Rules [Appendix 2A]
• Mutual Fund Dealer Rules [Appendix 2B]

Appendix 3 - Impact analysis of proposed rule amendments

• 1The ATON service is:
  • an electronic communication service, and
  • an automated transfer service for certain types of investment product positions including:
    • certain debt, equity and money market securities (i.e. those cleared and settled by The Canadian Depository for Securities Limited (CDS Limited) and/or by the Depository Trust Company (DTC))
    • certain mutual funds (i.e. those supported by fundserv)
  Other types of account positions outside of the CDS Limited, DTC and fundserv environments (which include non-depository eligible debt, equity and money market securities, mutual funds not supported by fundserv, guaranteed investment certificates and segregated funds) cannot be transferred using ATON.
• 2These would be book-based client name positions where the firm is the “dealer of record”.
• 3These would be physical client name positions and nominee name positions that are held (or controlled) by the firm in safekeeping and segregation, respectively, for the client.
• 4Proposed revised IDPC Rule subsection 4851(1) and changes adopted within proposed revised MFD Rule 2.12.
• 5Proposed revised IDPC Rule subsection 4851(1) and changes adopted within proposed revised MFD Rule 2.12.
• 6Proposed revised IDPC Rule subsections 4854(1), 4855(2) and 4857(1) and changes adopted within proposed revised MFD Rule 2.12.
• 7Proposed revised IDPC Rule subsection 4854(1) and changes adopted within proposed revised MFD Rule 2.12.
• 8Proposed revised IDPC Rule sections 4857 and 4858 and changes adopted within proposed revised MFD Rule 2.12.
• 9Proposed revised IDPC Rule sections 4801 and 4850 and titles for IDPC Rule 4800, Part B.1 and IDPC Rule 4800, Part B.2.
• 10We have asked Question #2 in section 8 of this bulletin regarding this proposed shortened timeline.