Getting to know the Investment Industry Regulatory Organization of Canada (IIROC)

On November 24, 2020, MaRS hosted an information session featuring speakers from the Investment Industry Regulatory Organization of Canada (IIROC). Petia Tchouk of MaRS Discovery District prepared this summary from the event, highlighting the key insights shared.

The Investment Industry Regulatory Organization of Canada, or IIROC, oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.

IIROC oversees a wide variety of companies, from large banks to boutique firms to newer entrants like robo-advisors and businesses handling cryptocurrency and digital assets.

This presentation focuses on two key areas at IIROC:

1. Market regulation, which sets the rules for trading and conducts surveillance to make sure rules are followed.
2. Member regulation, which focuses on business conduct and ensures members are financially solvent and meet requirements and regulatory obligations.

How to know if IIROC regulations apply to your business

The key question to ask is whether securities law applies to your business. If your business deals with a product that is considered a security, then you are subject to security legislation. 

Defining what counts as a security can be tremendously complicated. It is a broad category that includes stocks, bonds, profit-sharing agreements, stock options, investment contracts and much more. If you are trying to determine whether your work falls under IIROC’s mandate, your best route is to consult a lawyer with expertise in securities law. This is particularly true for novel assets like cryptocurrencies. 

Compliance considerations for businesses regulated by IIROC

IIROC sets high standards of conduct for the firms it regulates. They include:

• Ensuring high standards of ethical behaviour for staff, including avoiding conflicts of interest
• Making sure you have adequate Know Your Client (KYC) information and, in the case of advisory accounts, suggest suitable investments
• Knowing your product and conducting due diligence on securities products you offer
• Maintaining confidentiality, data control and good cybersecurity practices
• Following rules around fair advertising and good conduct on social media
• Meeting capital requirements

When it comes to monitoring markets, IIROC conducts both real-time and post-trade surveillance, and reviews the trading policies of regulated firms.

How is IIROC evolving? 

A key priority for IIROC is continuing its dialogue with industry stakeholders to foster collaborative relationships. For example, IIROC is closely following innovation in cryptocurrencies and the use of blockchain technology. It published a joint consultation paper with the Canadian Securities Administrators (CSA) discussing a framework for crypto-asset trading platforms. IIROC has created an internal committee and is working with the CSA to address topics like how to handle issues of custody.  

Visit its website for more information on regulatory innovation and how IIROC is working to protect investors while maintaining efficient and competitive capital markets.