Phase 1 of CIRO Dealer and Consolidated Rules Published for Comment
On October 20, 2023, the Canadian Investment Regulatory Organisation (CIRO) published for comment Phase 1 of the CIRO rule consolidation project rule proposals. The CIRO rule consolidation project aims to bring together the two member regulations rule sets currently applicable to investment dealers (the IDPC rules) and mutual fund dealers (the MFD rules). The consolidated member regulation rules will be known as the CIRO Dealer and Consolidated Rules. This is the first of five expected rule development and implementation phases.
Some of the highlights of the Phase 1 proposals, including some of the questions raised by CIRO, are as follows.
- Phase 1 proposes to eliminate the offering of temporary discretionary accounts, and in the interim, to limit the availability of temporary discretionary accounts to investment dealers only (mutual fund dealer clients have never had this option). Temporary “discretionary accounts” are advisory accounts for which a client gives their advisor temporary discretionary authority to make investment decisions on their behalf. CIRO asks whether you agree with this approach.
- Phase 1 would allow the following account types: (1) advisory account; (2) direct electronic access accounts; (3) managed accounts; and (4) order execution only (OEO) accounts. Only advisory accounts would be available to both investment dealers and mutual fund dealers; the other types would only be available to investment dealers. CIRO asks whether it should consider proposing to allow mutual fund dealers to offer managed accounts and OEO accounts in a future phase.
- The IDPC rules generally permit the delegation of tasks and activities, unless specifically prohibited by the rules, while conversely, the MFD rules prohibit the use of delegation, unless specifically permitted by the rules. CIRO has asked for comments on the drafting approach.
- Phase 1 proposals would allow CIRO to group exemptive relief orders. Currently, the MFD rules allow for the group of relief orders, whereas the IDPC only allows the CIRO Board of Directors to grant relief on a case-by-case basis.
- The Phase 1 proposals would adopt the existing language of IDPC Rule 1400 on general standards of conduct and other general rule requirements, which would be applicable to both investment dealers and mutual fund dealers.
Comments on the Phase 1 proposals are due by December 19, 2023.