Several provincial governments have designated investment firms and their registrants as essential services during the current COVID-19 pandemic. As a result, on March 31, 2020, the Investment Industry Regulatory Organization of Canada (IIROC) released a Rules Notice concerning exemptions from Dealer Member Rules (the “Notice”). This Notice details the exemptive relief that Dealer Members can apply for if they are experiencing hardships in complying with related IIROC Dealer Member Rules (“DMR”) as a consequence of the effects of the COVID-19 pandemic.
If Dealer Members wish to receive any form of exemptive relief provided for in the Notice, they must submit a written exemption application, by e-mail, detailing (a) the relief their firm wishes to receive; (b) why this relief has been made necessary with respect to the effects of the COVID-19 pandemic; and (c) where applicable, the alternative approach the firm would like to use to meet the spirit and intent of the relevant DMR requirement(s).
The exemptive relief is available in a number of areas:
- Regarding client document approvals, Dealer Members can now apply for relief to allow an alternative to obtaining a client signature where a client does not have the capability of providing an electronic signature and for safety reasons does not want to be physically present to provide a wet signature.
- In the area of timelines for reporting obligations, Dealer Members may apply for relief from filing Approved Person information update filings within 10 days and notice of termination filings within the normal filing period, provided that any extension of the timeline would require coordination with relevant Canadian Securities Administrators (CSA) jurisdictions.
- Concerning Form 1 audit procedures, Dealer Members may apply for relief from the requirement that individual Panel Auditors must be present at the physical security counts at the Dealer Member premises, provided that sufficient alternate audit procedures are performed to support an unqualified audit opinion.
- Regarding pre-approval requirements in cases where human resource or systems constraints impair a firm’s ability to perform these reviews in the normal manner, Dealer Members can seek relief allowing for alternative approaches to performing necessary pre-trade approvals for individuals requiring trade pre-clearance and pre-approvals of advertising and sales literature.
- Concerning supervision requirements, Dealer Members can receive relief allowing additional time to complete daily and monthly trade reviews, as well as branch office reviews.
- Dealer Members can also apply for relief through the suspension of late filing fees.
- With regard to margin-related matters, Dealer Members may seek relief allowing additional time to provide for swap contract market value deficiencies in order to conform to the standard capital treatment for other credit risk exposures, as well as relief from the requirement to obtain margin from a client where the firm has adequate capital to provide for this margin and it is a clear client hardship situation.
- Concerning registration and proficiency, Dealer Members may apply for relief from the completion of or the timing of completion of Approved Person pre- and post-approval proficiency requirements, and from requirements prohibiting use of the same staff to respond to both order execution only and advisory account inquiries within the same dealer or affiliated dealers.
- Finally, regarding identity verification threshold conformance to federal anti-money laundering legislation (AML) requirements, Dealer Members may seek relief from the requirement to ascertain the identity of any individual who directly or indirectly controls or has direction over more than 10% of a corporation or similar entity, provided that such verification continues to be done for those individuals whose control or direction exceeds the threshold set out in federal AML requirements. This exemption changes the threshold for corporations and similar entities from 10% to 25%. All other aspects of IIROC client identification rules currently required under IIROC Rule 1300 will remain in effect for the moment.
Coordination with relevant members of the CSA will be required for certain types of relief in cases where equivalent CSA requirements exist.
Once a Dealer Member sends a written exemption application, it will be assigned to an individual Decision Maker. These Decision Makers are IIROC senior staff who have been delegated limited discretion to facilitate timely consideration of each exemption application, for an initial period of three months, subject to a Board-approved extension. The Decision Maker will assess and decide upon each firm’s exemption application and will apply specific guidelines when doing so. These guidelines include that (a) each exemption request item must directly/primarily relate to an issue the Member has as a result of preparing or responding to the effects of COVID-19 on its operations; (b) the exemption is not prejudicial to the interests of the Dealer Member, its clients or the public; and (c) the Decision Maker may impose such terms and conditions on the exemption as the Decision Maker considers reasonable in the circumstances.
Once a Decision Maker makes a decision regarding the exemptive relief requested, the decision will be communicated via e-mail by IIROC’S General Counsel’s Office, with an attached document detailing the decision and any related conditions. Applicants will have the same right to appeal such decisions as they do with a Board exemption decision. It is to be noted that any exemption finalized by IIROC staff may be revoked by the Board, in its sole discretion and for any reason.
For each area for which the Decision Maker decides to grant relief, the relief granted will be for an initial period of up to six months, may be renewed for a one-time additional period of up to three months, and will expire at the end of the initial term, or, if applicable, at the end of the additional term. All relief granted will be subject to the same term length and same conditions as for all other Dealer Members requesting the same exemption for the same matter.