Our Insights

Regulatory Intelligence

Thomson Reuters

Canadian investment regulator details COVID-19 exemptive relief

Canada's investment regulator has provided further detail on exemptive relief for dealers facing disruptions from COVID-19. Areas targeted for relief by the Investment Industry Organization of Canada (IIROC) include client document approvals, reporting timelines, audit procedures, pre-approvals, identity verification standards, and margin-related matters.

IIROC approved the offering of exemptive relief on March 26, 2020, to mitigate difficulties experienced by dealers responding to the COVID-19 pandemic.

"Investment firms and their registrants have been designated essential services by several provincial governments, recognizing the importance of the provision of financial advice, services, and products to Canadians during this difficult time," IIROC said. "We will continue to be flexible in the way we regulate investment firms and their registrants while ensuring that investors and the integrity of our markets are protected."

Exemptive relief details

IIROC outlined the following areas targeted for regulatory exemptions:

Client document approvals: Alternatives to client signatures will be permitted for clients who are unable to provide electronic signatures or are unwilling to sign in person for safety reasons. Alternative procedures include keeping records of client instructions and authorizations, IIROC said.

Timelines for reporting obligations: Relief from filing approved person information updates within the normal 10-day period, as well as notice-of-termination filings. Timeline extensions would require coordination with the relevant provincial securities authority.

Form 1 audit procedures: Relief from the requirement that individual Panel Auditors must be present for physical counts of securities on dealer premises, as long as they perform unspecified "sufficient alternate audit procedures" to support an unqualified audit opinion. (Dealer Member Rule 300.2 (a) (ii))

Pre-approval requirements: Alternative approaches to performing trade pre-clearance and pre-approvals for sales literature will be permitted, where human or technology constraints impair a firm's ability to perform reviews in the normal manner. (Dealer Member Rule 29.7 through 29.7(5))

Supervision requirements: Relief allowing additional time to complete daily and monthly trade reviews (Dealer Member Rule 2500, Part IV) and branch office reviews (Dealer Member Rule 2500)

Suspension of late filing fees

Margin-related matters: Relief allowing additional time to provide for swap contract market value deficiencies, in order to reflect the standard capital treatment for other credit risk exposures (Dealer Member Rule 100.2(k)). Additionally, IIROC will relieve the requirement to obtain margin from a client, if the firm has adequate capital to provide that margin and the client has "clear hardship". (Dealer Member Rule 17.11)

Registration and proficiency: Relief from completion of approved person pre- and post-approval proficiency requirements (Dealer Member Rule 2900 provisions). IIROC also offered relief from requirements prohibiting use of the same staff to respond to both order-execution-only and advisory account inquires within the same dealer or affiliates (Dealer Member Rule 3200, Part A, Item A.1. (c))

Identity verification per federal anti-money laundering (AML) requirements: Relief from the requirement to identify individuals who directly or indirectly control over 10 percent of a corporation or similar entity (Dealer Member Rule subsection 1300.1(b)). IIROC conditioned this relief on firms continuing verification activities for individuals whose control exceeds the threshold set out in federal AML requirements. "This exemption changes the threshold for corporations and similar entities from 10 percent to 25 percent," IIROC noted.

Process for requesting relief

Dealers seeking exemptive relief must submit a written application via email with the following details: The relief being sought;

  • Why this relief is necessary, with specific reference to COVID-19; and
  • Proposed alternative approaches for meeting the "spirit and intent" of relevant IIROC rules.

Relief applications should be submitted by email to: exemptions@iiroc.ca, with the subject-line stating "COVID-19 related exemption request" and the firm's name. Coordination with relevant provincial securities authorities will be required for certain types of relief, IIROC added.

Conditions and guidelines

Regulators will apply the following guidelines when exercising discretion over relief requests, IIROC said:

  • Exemption requests must directly relate to a problem resulting from COVID-19 disruptions. Examples include staff working at different locations, work-from-home arrangements, or staff shortages due to illness.
  • Exemptions must not be prejudicial to the interests of the dealer, its clients, or the public.
  • IIROC decision makers may impose terms and conditions on the exemption as considered reasonable in the circumstances.

Emphasizing the temporary nature of these arrangements, IIROC noted that exemptions will:

  • Last for an initial period of up to six months, with the possibility of a one-time extension of up to three months;
  • Expire at the end of the initial term or, if applicable, the end of the additional term; and
  • Be subject to the same term length and same conditions as for all other dealers requesting the same exemption for the same matter.

Any exemption granted by IIROC staff may be revoked at any time by its board of directors, the regulator added.

This content is created by Thomson Reuters and is strictly for information purposes only. It does not necessarily reflect the views of RBC Investor & Treasury Services (RBC I&TS) and is not intended as advice or a recommendation to engage in any regulated activity with RBC I&TS or any of the entities through which it operates. RBC I&TS accepts no responsibility or liability of any kind for the accuracy, reliability or completeness of the information, or for any action, or results obtained, from the use of the information.