List and description of proposed amendments

Transcription

1 List and description of proposed amendments Series 1000 Interpretation and Principles Rules Rule reference Discussion of change Rule 1100 Interpretation 1105 Transitional Provision To clarify the transition of existing discretionary exemptions. Rule Definitions 1201(2) definition of acceptable marketplace For clarity to ensure consistent use of defined term and to include alternative trading systems in definition. 1201(2) definition of discretionary account For consistency with the drafting of advisory account and managed account. 1201(2) definition of option Definition changed to a product-specific definition for clarity. 1201(2) definition of order execution only account For consistency with the drafting of advisory account, managed account and discretionary account. Language added to track/conform with NI Change aligns with the disclosure given to clients in 3241(2)(i)(b). 1201(2) definition of securities laws To correct an inadvertent omission. 1201(2) definition of securities regulatory authority To ensure consistency with the changes to the defined term securities laws. 1201(2) definition of significant area of risk To remove This includes, but is not limited to: and the list set out after this phrase to avoid confusion. The list was provided for illustrative purposes only and not meant to be exhaustive. 1

2 Rule 1300 Exemptive Powers of IIROC 1302(1) Exemptions from the IIROC requirements To clarify that for some requirements, exemptions are granted by bodies other than the Board, such as District Council. Rule 1400 Standards of Conduct 1404(2) Policies and procedures For consistency with similar requirements in section 3904, the word sufficient replaced with designed. Rule 1500 Managing Significant Areas of Risk 1502(3) Responsibility for significant areas of risk The word compliance was removed to clarify that the Executive is responsible for the policies and procedures for their area. The CCO is responsible for compliance policies and procedures. Series 2000 Dealer Member Organization and Registration Rules Rule 2100 Ownership of a Dealer Member s Securities 2101(2) Introduction Drafting clarification. 2107(1)(iii)(c) Ownership of another Dealer Member 2108(2) Ownership of a significant equity interest and ownership of assets Rule 2150 Dealer Member Structure Business Locations, Holding Companies, Related Companies, and Diversification 2153(1) Holding companies 2155(3) Approval as an order execution only account services provider Removal of requirement to provide IIROC with copy of policies and procedures. 2157(9) Shared office premises 2

3 2157(17)(ii) and (iii) Shared office premises Rule 2350 Trade Names and Disclosures 2352(1) Trade names Variations of a DM s name are trade names. Rule 2400 Principal and Agent Relationships 2403 and 2404 Principal and agent relationships 2475(18)(ii)(a) and (b) and 2476(18)(ii) Addition of on the day or the next business day it is received by the introducing broker in response to comments noting a number of practical difficulties associated with the timeline. Consequential amendments to 2475(18)(ii)(b) and 2476(18)(ii). Rule 2500 Dealer Member Directors and Executives 2501 to 2507 Dealer Member Directors and Executives To conform drafting and to clarify the IIROC approval process for an individual that a Dealer Member wants to appoint as a Director or an Executive. 2505(1) - Chief Financial Officer To clarify IIROC s approval process for CFOs and to clarify that anyone designated as the CFO who is not already designated as an Executive, must then also be designated as an Executive. 2506(1) - Chief Compliance Officer To clarify IIROC s approval process for CCOs and to clarify that anyone designated as the CCO who is not already designated as an Executive, must then also be designated as an Executive. 2507(1) - Ultimate Designated Person To clarify IIROC s approval process for UDPs and to clarify that anyone designated as the UDP who is not already designated as an Executive, must then also be designated as an Executive. Rule 2550 Approval of Individuals 2551 to 2557 Approval of Individuals To conform drafting and to clarify the IIROC approval process for Approved Persons and investors, and related matters such as outside 3

4 business activities. 2552(1) Individual approval In a previous publication for comment, the scope of this requirement was expanded beyond IIROC s current requirements to include all Approved Persons rather than just Registered Representatives and Investment Representatives. We are not proposing a change to this aspect of the requirement but a comment was made that expansion of the scope of the requirement may not have been appreciated by readers so, out of an abundance of caution, we are republishing it for comment. 2552(1)(i) and (ii) Individual approval The previously published language limited the registration requirement to only those jurisdictions where clients of the Dealer Member / individual reside. We have corrected this section to clarify that registration is required in those jurisdictions where the Dealer Member / individual carries on securities related business. 2552(2) Individual approval We have changed the defined term Director to director to reflect that the individual would not be approved yet at this stage. 2554(1) Approval of Registered Representatives, Investment Representatives, Portfolio Managers and Associate Portfolio Managers 2555(2) The Approved Persons activities outside of the Dealer Member We have removed the reference to or other activity. The concept of outside activities being both business activities and other types of activities (e.g. coaching a sport team) was only intended to be included in 2555(1) (the general prohibition on illegal activities and conduct unbecoming). We did not intend to expand the scope of 2555(2), which deals with notification and approval requirements, beyond outside business activities. Rule 2600 Proficiency Requirements and Exemptions from Proficiencies 2601 and 2602 Proficiency requirements Amendments to various requirements. Additional details discussed in subsection 2.2(ii) of the Notice. 2603(2) Specific exemptions Deletion of a redundant transition provision. 4

5 2606(3) Course validity and exemptions from rewriting courses 2607 and 2608 Transition of representatives into Associate Portfolio Manager and Portfolio Manager categories New provision added to address predecessor courses. Consequential amendments related to the reintroduction of the Associate Portfolio Manager and Portfolio Manager categories. Additional details discussed in subsection 2.2(i) of the Notice. Series 3000 Business Conduct and Client Accounts Rules Rule 3100 Dealing with Clients 3115(2)(v)(b) Personal financial dealings 3119 to 3129 Best Execution of clients orders Plain language drafting of amendments, which amend and replace current DMR 3300 effective. See IIROC Notice Rule 3200 Client Accounts 3211(1) Account appropriateness To clarify that the account appropriateness determination is conducted prior to opening an account and is not an ongoing obligation. Non-substantive changes also made for clarity. 3211(2) Account appropriateness We have confirmed that OEO firms are only subject to the requirement to determine the account is appropriate for the potential client and not the requirement to determine that products and account types within the client s account are appropriate for the following reasons: Consistency with existing practice Tracks suitability exemption. 3211(3) Account appropriateness We have added a new exemption from the account appropriateness requirement for certain Dealer Members (e.g., carrying brokers) on the basis that another registered entity is responsible for the account appropriateness determination. 3217(2) Leverage risk disclosure statement To remove the exception for margin accounts in the leverage risk disclosure requirements. 5

6 3241(2)(i) Order execution only services 3276(3) Conflicts of interest (discretionary accounts) 3276(3)(i) and (ii), and 3280(2) Conflicts of interest (discretionary accounts) and (managed accounts) 3276(3)(iv) Conflicts of interest (discretionary accounts) 3280(2)(i) Conflicts of interest (managed accounts) 3280(2)(iv) Conflicts of interest (managed accounts) To clarify the intent of the requirement and to make consequential amendments reflecting changes in 3211(2). Section added for consistency with section Conflicts of interest (managed accounts). Reference to derivative of an issuer to be changed to derivative of a security of an issuer for clarity similar change made to proposed section 3280(2) - Conflicts of interest (managed accounts). For consistency with similar requirements in NI Added a responsible person to clarify the intent of the requirement to capture investment funds. For consistency with NI s.13.5(2)(c). 3280(4) Conflicts of interest (managed accounts) For consistency with the supervision of managed account requirements in 3970(2)(ii). Rule 3400 Suitability 3402(1)(iii)(a) Retail client suitability requirements 3404(1) Exemptions from and exceptions to suitability requirements 3404(1)(ii) Exemptions from and exceptions to suitability requirements Addition of withdrawal of securities from an account to the suitability triggering events. To conform the words of the suitability exemption for OEO firms to IIROC s regulatory expectations and to the exemption for general advice in NI This change is also consistent with current practice and client expectations. Changed clause to provides no recommendations to purchase, sell, hold, or exchange any security, including any class of security or the security of a class of issuer to conform with NI Rule 3500 Sales Practices 3509(6) - Premarketing For consistency with the obligations under subsection 3601(1). 6

7 Rule 3600 Communications with the Public 3607(2) Policies and procedures and minimum disclosure (Research Reports) 3611(2)(iii) Independent third party research report In a previous publication of the PLR Rule Book, the obligation in this requirement was changed to that of a Supervisor from our current requirement that refers to a supervisory analyst or head of research. We are not proposing a change to this requirement but a comment was made that change to the requirement may not have been appreciated by readers so, out of an abundance of caution, we are republishing it for comment Visiting an issuer Rule 3700 Reporting and Handling of Complaints, Internal Investigations and Other Reportable Matters 3715(2)(i) - Policies and procedures (Client complaints institutional clients) 3726(3)(iv)(c) Response to client complaints In a previous publication of the PLR Rule Book, this requirement for firms to acknowledge verbal institutional client complaints was introduced. We are not proposing a change to this requirement but a comment was made that this new requirement may not have been appreciated by readers so, out of an abundance of caution, we are republishing it for comment Reporting legal actions In a previous publication of the PLR Rule Book, this requirement was changed to require reporting to an appropriate Executive rather than to senior management. We are not proposing a change to this requirement but a comment was made that the scope of the requirement may not have been appreciated by readers so, out of an abundance of caution, we are republishing it for comment. 7

8 Rule 3800 Dealer Member Records and Client Communications 3816(2)(i)(d) and (x)(a)(iv)(b)(ii)(e) Trade confirmations For consistency with securities laws. Rule 3900 Supervision 3912(1) Responsibilities of the Chief Compliance Officer 3926(3) Account supervision policies and procedures In DMRs (2500IA(2)), we require policies and procedures be approved by senior management. In a previous publication, we replaced that with Chief Compliance Officer. We are now adding the term appropriate Executive for consistency with other areas where we replaced senior management with appropriate Executive and to recognize that Supervision can fall under either the CCO or another Executive (such as the COO) to 3961, 3964 to 3966, Supervision To clarify and ensure consistency in the drafting of the supervisory requirements. Series 4000 Dealer Member Financial and Operational Rules Rule 4100 and 4200 General Dealer Member Financial Standards 4115(2) Calculating current capital position monthly documentation and reconciliation 4118(1) Options for calculating risk adjusted capital available to well-capitalized Dealer Members 4151(1) Dealer Member financial filings 4153(1) Late filing fee 4179(1)(iii) Review the Dealer Member s position balancing and account reconciliations 4180(1)(iii) Review bank reconciliations 4182(2)(vii) Obtain written positive confirmations To codify existing practices. To codify existing industry practice. To codify existing industry practice. To codify existing industry practice. 8

9 4183(2)(i)(a) Selection of accounts for positive confirmation To codify existing industry practice. 4267(1) New issues To clarify calculation of the unexpired term for a new issue. 4271(1) and 4272(1) Definitions Change made to ensure provision remains current should definition of terms change going forward. 4275(1)(iv) Disclosure formal valuations Consequential amendment for consistency with changes to 4271(1) and 4272(1). Rule 4300 and 4400 Protection of Client Assets 4311(1)(ii)(c) Definitions (general segregation requirements) 4318(1) Determining securities to comply with segregation requirements 4341(1)(i) and 4347(1) Definitions (general custody requirements) 4424(6) Clearing (short pro sales) 4429(7) Transferring securities 4457(1)(ii) and 4458(1)(ii) Minimum insurance requirements For consistency with the changes previously made to other margin requirements to reflect the move from a credit required concept to a margin concept. Rule 4500 and 4600 Financing Arrangements 4510 to 4517 Repurchase market trading practices To clarify that requirements apply to repurchase agreements and reverse repurchase agreements. Rules 4700 and 4800 Operations 4751(1)(v) Definitions (general trading and delivery standards applicable to all transactions) To reflect change in defined terms. 4758(1) Early registration of securities To clarify drafting. 4803(1) and 4806(1) Trading units For consistency with current practice. 4807(5)(ii) Stock delivery For consistency with current practice. 9

10 Series 5000 Dealer Member Margin Rules Rule 5100 Margin Requirements Application and Definitions 5130(3) (vi) Definitions (foreign listed equity securities eligible for margin) 5130(8)(viii) Definition exchange-traded option To reflect change in defined terms. Reinserted definition which is the same as current DMR definition. Rule 5600 Margin Requirements for Offset Strategies Involving Debt and Equity Securities and Related Instruments 5614(2) and 5618(2) Offsets To ensure consistency with designated rating organizations named in other rules. 5644(1) Offset relating to a pending amalgamation, acquisition, spin-off or other securities related reorganization transaction To correct drafting error. The terms Newco and Oldco were inadvertently reversed. Rule Margin Requirements for Offset Strategies Involving Derivative Products 5712(2) Requirements for option offset strategies To add an existing requirement (DMR (h)(i)(A)) that was inadvertently deleted in previous publication. Series 7000 Debt Markets and Inter-Dealer Bond Brokers Rules Rule 7100 Debt Markets 7103(2)(vi)(a) Policies and procedures (Debt Markets) To require written policies or guidelines on the Dealer Member s mark-ups, mark-downs and commissions on debt securities purchased from clients. 7105(3) Confidentiality Change made in response to comments that the provision was too broad and inadvertently caught Dealer Members that were not Government Securities Distributors. 10

11 Rule 7200 Transaction Reporting for Debt Securities 7203(1),(2)(iv) and (vi), and (6) Reporting requirements Series 8000 Procedural Rules Enforcement Rule 8100 Enforcement Investigations 8104(5) Obligations of Regulated Persons and other persons We have replaced the word exchange with the defined term Marketplace to conform drafting to intent of the provision. Rule 8200 Enforcement Proceedings 8212(2)(v) Protection orders 8212(2)(v) and 3(iii) Protection orders To conform defined terms. We have changed the word marketplace to the defined term Marketplace to conform drafting to intent of the provision. Series 9000 Procedural Rules - Other Rule 9200 Approvals and Regulatory Supervision 9201(1) Introduction (Approvals and Regulatory Supervision) Consequential amendment to reflect changes to 9206(2). 9206(2) Exemption applications To clarify that exemptions from the introducing broker/carrying broker requirements under Rule 2450 are not approved by the District Council. They are approved by the Board pursuant to 1302(1). Changes only to the French version of the proposed PLR Rule Book Rule reference Discussion of change 2476(17)(i), 3216(5), 3247(2), 4323(1), 7109(2) Changes to conform to the English version of the PLR Rule Book. 11