Republication of Proposed Amendments — Fully paid lending and financing arrangements 

1. Background

On February 15, 2024, we published for comments proposed amendments to the Investment Dealer and Partially Consolidated Rules and IDPC Form 1 (Form 1) relating to fully paid securities lending and financing arrangements, in Bulletin 24-0067 (Proposed Amendments). These amendments aim to codify into rules the existing framework governing Dealer Member (Dealer) fully paid lending (FPL) programs, which at present rely on exemptions, and associated terms and conditions, granted by the Board of Directors of CIRO (Board).1

The Proposed Amendments incorporate established requirements and safeguards that have proven effective, preserve investor protection and eliminate the need for ongoing Board exemptions. They introduce a proportional framework that prioritizes investor protection in retail fully paid lending, while allowing greater flexibility for institutional fully paid lending, in line with traditional market practices. Additionally, the Proposed Amendments clarify and streamline the rules governing financing arrangements by addressing existing drafting overlaps and inconsistencies.

In the same bulletin, we also published for comments revised guidance on fully paid securities lending (Draft FPL Guidance), which will replace the existing guidance GN-4600-22-001.

We received six (6) comment letters from the public and a few clarifying questions from the CSA in response. No significant revisions to our proposal were needed as a result of these comments, except for a few non-material revisions which we discuss in section 2.2. and 3. A summary of the comments received, and our response is provided in Appendix J.

The registered account restriction

The Proposed Amendments, among others, codify an existing restriction that limits Dealer FPL activity to client’s non-registered accounts, meaning that retail FPL in clients’ registered accounts would not be permitted under CIRO Rules.2 The restriction was originally imposed by the Board on Dealer FPL programs as a precautionary measure, due to the uncertainty around the treatment of lending activity in registered accounts under ITA and the risk of potential adverse tax consequences for clients. In other words, the existing restriction does not stem from securities laws, but rather from tax-related considerations.

Recent tax law developments

Since publishing our Proposed Amendments, the Department of Finance has shared their view that FPL arrangements can offer benefits for both savers and financial institutions, without compromising the tax legislation objectives, particularly those around the qualified investment rules. They indicated plans to recommend amendments to the Income Tax Act to clarify that certain securities lending arrangements entered into within a registered plan, would not be treated as non-qualified investments, provided they meet specific conditions and with retroactive effect since January 1^st, 2023. These proposed amendments were published for comment on August 15, 2025.3

In light of these developments, we believe that proceeding with our initial proposal to maintain and codify the registered account restriction within the CIRO Rules is no longer justified. Doing so would risk introducing confusion, regulatory misalignment, and the need for future rule revisions. Instead, we propose deferring the matter of whether FPL should be permissible in registered accounts, which is fundamentally a question of tax law rather than securities regulation, to the appropriate tax authorities.

2. Revised Proposed Amendments

2.1 Material changes - Revised Account Restriction

We are proposing to revise the Proposed Amendments by removing the initially proposed restriction in IDPC Rule subsection 4628(1) entirely.

Despite such revision, Dealers remain responsible under CIRO’s general standards of conduct for ensuring that any fully paid lending arrangements entered within client’s accounts, being those registered or non-registered accounts, are conducted in compliance with applicable tax laws and with full transparency to clients. Furthermore, CIRO’s specific requirements governing fully paid lending, which are designed to protect investors and uphold market integrity, would apply equally to both registered and non-registered accounts. These include, among others, obtaining the client’s consent to lending within their accounts, recognizing the client’s right to impose lending restrictions, providing comprehensive risk disclosures, ensuring adequate collateral arrangements, and limiting lending to liquid securities with low volatility.4

As such, we believe the proposed revision maintains regulatory harmonization without compromising the investor protection and market integrity framework we sought to codify in our initial proposal.

2.2 Non – material changes – Consequential and clarifying

We are also making the following changes to our Proposed Amendments, which are either consequential in nature, meaning they ensure consistency within rules, or seek to enhance rule clarity in response to the comments received:

• IDPC Rule clause 4622(1)(i) has been revised to read ‘the roles, rights and responsibilities of each party to the agreement...’ consistent with existing CIRO requirements and contract law;
• IDPC Rule subsection 4625(1) has been removed because the contemplated asset reuse restriction therein can be interpreted more broadly than intended, inadvertently restricting certain permissible hedging strategies; clarification has been provided in the Draft FPL Guidance instead;
• IDPC Rule section 4628, has been revised with consequential changes to the proposed Revised Account Restriction and remove the word ‘further’, which was deemed redundant and likely to cause confusion;
• IDPC Rule subsection 4630(1) has been edited for enhanced drafting clarity.

These revisions are non-material and do not produce any new impact.

The revised IDPC Rules are set out in Appendix A. Blackline comparisons to the current IDPC Rules and the previous version published for comments are included in Appendices B and C, respectively.

In comparison, no revisions to the Proposed Amendments to Form 1 are needed. For reference, these amendments along with a blackline comparison to the current Form 1 provisions, are included in Appendices D and E, respectively.

3. Other revisions

In addition to the above, we have made the following consequential and clarifying revisions to the Draft FPL Guidance and the FPL securities eligibility criteria:

• Revisions to the Draft FPL Guidance: We have made changes to sections 2.3, 2.4, 2.6 and 2.9 in the guidance, in part to reflect the rule revisions discussed in section 2, above, and to also enhance guidance clarity based on comments received from the public and the CSA. The revised guidance, along with a blackline comparison to the previous version published for comments, is included in Appendices F and G, respectively.
• Revisions to the FPL securities eligibility criteria: We have made consequential changes to the FPL securities eligibility criteria,5 to align with the Revised Account Restriction, and improve drafting. The revised criteria, along with a blackline comparison to the previous version published for comments, are included in Appendices H and I, respectively.

4. Impact of the Revised Proposed Amendments

4.1 Stakeholder impact

Overall, the proposed revisions discussed in this bulletin remain consistent with the objectives and considerations of our initial proposal, outlined in Bulletin 24-0067. They seek to achieve rule clarity and regulatory consistency without compromising the foundational objectives of client protection and market integrity. Particularly with respect to the Revised Account Restriction, the alternative of codifying the existing restriction in a departure from the direction contemplated under the tax legislation, would only create confusion and unduly interfere with market demand and investors’ financial choice.

4.2 Other impacts

The proposed revisions do not impact Mutual Fund Dealers, because at present they are not permitted to engage in fully paid lending. Similarly, no regional-specific impact or impact on other policy projects as a result of these revisions has been identified.

5. Policy Development Process

5.1 Regulatory Purpose

The scope of the Revised Proposed Amendments, is to ensure rule clarity and regulatory alignment between CIRO Rules and tax legislation, thereby minimizing the risk of conflicting regulatory regimes and the need for future rule revisions. They have been determined to be in the public interest, consistent with the standards set out in CIRO’s recognition orders, including that of ensuring flexibility and responsiveness to the future needs of the evolving capital markets, without compromising investor protection.

5.2 Regulatory Process

The Board of Directors of CIRO has determined the Revised Proposed Amendments to be in the public interest and on September 24, 2025, approved them for republication for comment.

In determining to pursue the Revised Account Restriction and republish for comment we consulted with the following stakeholders, none of whom objected to proceeding with the proposal:

• Canadian Securities Administrators,
• Department of Finance,
• Canadian Investor Protection Fund,
• CIRO’s Financial and Operations Advisory Section sub-committees, and
• CIRO’s Investor Advisory Panel.

After considering comments in response to this republication together with any comments of the CSA, CIRO staff may recommend further revisions. 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 Amendments will be subject to approval by the CSA. If the revisions or comments are material, CIRO staff will submit any revisions to the Board for approval for republication or implementation, as applicable.

6. Appendices

• Appendix A - Revised Proposed Amendments to IDPC Rules (Clean copy)
• Appendix B - Revised Proposed Amendments to IDPC Rules (Blackline comparison to current rules)
• Appendix C - Revised Proposed Amendments to IDPC Rules (Blackline comparison to last publication)
• Appendix D - Proposed Amendments to Form 1 (Clean copy)
• Appendix E - Proposed Amendments to Form 1 (Blackline comparison to current Form 1 provisions)
• Appendix F - Revised Draft FPL Guidance (Clean copy)
• Appendix G - Revised Draft FPL Guidance (Blackline comparison to last publication)
• Appendix H - Revised FPL securities eligibility criteria (Clean copy)
• Appendix I - Revised FPL securities eligibility criteria (Blackline comparison to last publication)
• Appendix J - Summary of public comments

• 1Current FPL framework was outlined and published for transparency in GN-4600-22-001.
• 2An exception was made for Tax Free Savings Accounts, which historically were treated more akin to non-registered accounts, to the extent Dealers offering FPL for these accounts would ensure compliance with applicable tax laws.
• 3Please refer to clause34 of the Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations (Technical Amendments), and related explanatory notes, published August 15, 2025, and available on the Department of Finance Canada website.
• 4Please refer to Bulletin 24-0067, for a more in-depth discussion of requirements applicable to fully paid lending.
• 5As outlined in Bulletin 24-0067, these are existing criteria applicable to Dealer FPL programs and which we plan to carry forward under the Proposed Amendments.