The objective of Phase 1 of the Canadian Investment Regulatory Organization's (CIRO's) Rule Consolidation Project is to establish a framework for the development of consolidated rules that will apply to all CIRO Dealer Members, to be known as the CIRO Dealer and Consolidated (DC) Rules. The DC Rules structure involves the adoption of rule interpretation provisions, definitions of common application throughout the rules, rule exemption provisions, and general standards of conduct applicable to all activities of dealers and their employees, as well as Approved Persons.
CIRO noted that there were material differences in the interpretation, application, definitions, exemptions, and general standard provisions of the IDPC Rules and MFD Rules that will require further consideration. As a result, CIRO has proposed the use of interim definitions, where applicable, which retain the status quo. These definitions will likely require revision once a decision is made on the material differences in other phases of the project.
A few things to note: proposed DC Rule 1100 will include provisions to adopt existing IDPC Rule general rule application provisions relating to the use of electronic signatures.
In addition, a difference was identified between the existing IDPC and MFD Rule interpretation and application provisions regarding delegation of tasks and activities. As part of the Phase 1 Proposed DC Rules, CIRO is proposing to adopt the existing IDPC Rule relating to delegation, but has not yet made a final decision whether the final general rule requirement should permit or prohibit the use of delegation, subject to specific prohibited exceptions itemized elsewhere throughout the rules.
In the case of discretionary accounts (advisory accounts for which a client who is frequently or temporarily unavailable has given to their advisor temporary discretionary authority), CIRO has proposed the elimination of the offering of the discretionary account arrangement within a future phase of the Rule Consolidation Project but intends to continue in the interim to limit the dealer types that can offer this account type to investment dealers. CIRO is also proposing to adopt within DC Rule 1300 provisions that incorporate the previous ability within the former MFDA General By-law to grant exemptive relief to a group of regulated persons rather than on a case-by-case basis. CIRO is also proposing to adopt within DC Rule 1400 existing language such that general standards of conduct will be applicable to all Dealer Members, including Mutual Fund Dealer Members.
The consultation seeks general comments and asks specific questions relating to items such as the proposed drafting approach for permitted delegation, the need for temporary discretionary accounts and whether Mutual Fund Dealers should be permitted in future to offer managed accounts and order execution only accounts. The comment period for the consultation ends on December 19, 2023.
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