What is the IIROC?

The Investment Industry Regulatory Organization of Canada, IIROC, is a self-regulatory organization. It is charged with managing investment dealers, brokers, and trading activity in debt and equity markets in Canada. The organization protects investors and has various powers. Moreover, its goal is to secure orderly and fair markets, and regulate all securities-related commerce within Canada. The organization is equivalent to FINRA in the US.

 IIROC Regulation

The IIROC has quasi-judicial powers to establish and enforce legislation in Canadian securities and trading markets. It can impose fines, suspensions, and other disciplinary actions.

Some of the roles of the regulatory organization are to write investment industry standards and enforce them. At the same time, it screens investment advisors, conducts financial compliance reviews, sets minimum capital requirements, and holds disciplinary proceedings.

Companies regulated by IIROC, also participate in CIPF. It protects individual investors if an investment firm should go bankrupt.

Industry Compliance Departments

The organization systematically screens all investment advisors that are employed by IIROC-regulated companies. It ensures that these advisors have good character, proper training, and have completed all the educational courses that are required.

IIROC conducts financial compliance reviews to set minimum capital requirements to make sure that companies have enough capital. The advisors approved by the organizations get familiar with the financial situation of the client, its investment needs and objectives, experience in investing, and risk tolerance.

The industry compliance departments, which supervise the business, trading, and financial operations, carry 250 to 300 reviews every year.

These reviews examine the firm’s actions against the IIROC Dealer Member Rules, UMIR, and securities legislation.

The regulator focuses on the aspects of a firm’s business that show heightened regulatory risk. Then it issues a report to the firm about their compliance and highlights the areas that they need to change or improve.

Each department sticks by its risk model. In fact, they act as a risk management tool to help recognize, define, and assess risks. With the help of these models, the staff determines the risk profile of each company. They are also applied to prepare a Risk Trend Report. RTRs provide detailed data about specific assets and websites, reflecting areas of risk in each company’s business model. IIROC sends the RTR to firms with their recommendations on areas in which they should have priority focus to improve.

Each year, IIROC issues a Compliance Priorities Report which assists firms to define areas of focus with their compliance programs, supervisory error, and inherent controls.

 UMIR

IIROC has set out rules that govern trading practices in Canada. Universal Market Integrity Rules, UMIR, is doing market surveillance and trading review analysis and promotes fair, equitable, and efficient markets. The reviews IIROC conducts evaluate whether trade-desk procedures comply with UMIR and relevant provincial securities law.

Additionally, the regulator investigates possible dealer or marketplace wrongdoings by its dealer companies, approved persons, and other participants of the market.

Disciplinary proceedings of the regulator may result in penalties such as fines, suspensions, permanent bans, or terminations for companies.

IIROC applies the money raised from fines to capital expenditures for regulatory concerns, industry education projects, and other uses.

Member traders, who have a good track record with the regulatory organization and are also enrolled with a Canadian securities regulatory authority may gain access to trade with the CSE.

The IIROC modifies UMIR rules occasionally. In 2015, the IIROC proposed changes to the rules after a CSA plan to clarify the interpretation of a protected order.

 Cooperation with Institutions

The regulator is constantly working with institutions to provide efficient market oversight, increase efficiency, and improve the existing surveillance system.

In 2019, with Nasdaq, an American stock exchange, IIROC launched its upgraded market surveillance system. The regulator used Nasdaq’s SMARTS, a leading-edge technology that significantly improves the way IIROC manages Canada’s capital markets and keeps investors from possible market abuses.

At the beginning of 2020, IIROC released its proposal Improving Self-Regulation for Canadians. Furthermore, it brought IIROC and MFDA (the Mutual Fund Dealers Association of Canada) as divisions of a consolidated self-regulatory organization, SRO. The program will have several benefits, such as improved investor protection and access to advice. At the same time, the overlapping regulatory burden will reduce significantly.