Message from The Chair

Headshot Paul D. Allison

The overarching goal remains constant year over year: to do excellent work each and every day to ensure that IIROC delivers on its mission as a public interest regulator, both to protect investors and to ensure healthy Canadian capital markets.

I have served on IIROC’s Board since 2013; I and my fellow Directors have a unique vantage point on how the investment industry and the way we regulate it are changing.

As part of a self-regulatory organization, our Directors bring different experiences and perspectives to our deliberations: from the industry itself, serving investors at firms of different sizes in different regions of the country, from markets where securities are bought and sold for those investors, or as Independent Directors, providing an outside perspective on regulatory matters. But despite our different backgrounds, we are united in agreeing that the changes taking place – in the way Canadians choose to receive advice and when and how they invest – require this organization to keep pace with proportionate, timely regulation that positions IIROC for the future.

My colleagues bring their considerable depth and variety of experience to bear in helping IIROC articulate and achieve its strategy and vision. We are well-versed in the evolving issues facing investors, the investment industry and capital markets and the Board fully supports the ways that IIROC is moving to address them through its Strategic Plan and priorities.

It’s important to note that although the annual priorities supporting IIROC’s Strategic Plan may change, the overarching goal remains constant year over year: to do excellent work each and every day to ensure that IIROC delivers on its mission as a public interest regulator, both to protect investors and to ensure healthy Canadian capital markets.

The Board is grateful for the increased enforcement authority granted to IIROC by provincial and territorial governments in the last fiscal year, and applauds the actions taken to strengthen IIROC’s legal authority. These powers give us the tools we need to carry out the job we’ve been assigned. We look forward to other provinces taking similar action to protect investors, hold wrongdoers accountable and deter others who might otherwise be tempted to engage in such activity.

The importance of IIROC’s day-to-day work to protect investors is critical to our success in other areas. Because this work is consistently done well, it builds confidence in the contribution IIROC makes to maintaining the strength of Canada’s regulatory framework. The Board as a whole supports both the ongoing regulatory work that is done every day, as well as the strategic initiatives that better position IIROC for tomorrow.

On an individual level, I want to acknowledge the contributions of Rita Achrekar and Thomas A. Wittman, who have left our Board, and welcome Lucie Tedesco and Jos Schmitt as Directors. Lucie was most recently Commissioner of the Financial Consumer Agency of Canada (FCAC) and Jos is President and CEO of the Aequitas NEO Exchange and Aequitas NEO Connect. With their extensive experience, we know they can provide invaluable insights that will strengthen our Board and IIROC.

I would also like to thank IIROC’s leadership and all staff for the valuable work that they do to protect Canadian investors and to support healthy capital markets across Canada.

Paul D. Allison Signature
Paul D. Allison
Chair of the Board

Report from the President and CEO

Headshot Andrew J. Kriegler

The past year saw us lay the foundations for IIROC’s transformation, a series of changes that will position us to evolve alongside the industry we regulate and the Canadians we serve.

Canadians’ attitudes towards investing, saving and the management of their financial lives are being fundamentally altered. A changing demographic and an evolving society, new entrants in financial services, the availability of new digital tools and technologies and the convergence of once discrete financial products into a comprehensive package of financial life management services are all having an impact.

As a result, Canadians are changing the way they want to consume advice and services and how they interact with the firms that provide them. As Canada’s financial services industry evolves in response to these changes, IIROC needs to evolve with it.

This past year saw us lay the foundations for IIROC’s transformation, a series of changes that will position us to evolve alongside the industry we regulate and the Canadians we serve.

In collaboration with the global advisory firm Accenture, IIROC completed a landmark report on the Canadian wealth management industry – Enabling the Evolution of Advice in Canada. The research supporting the report will help us to facilitate financial services innovation and to accommodate new advice and service offerings without compromising investor protection or choice.

Follow-through on the report will require changes to our regulatory framework. In some areas, we can accomplish these changes by creating or augmenting guidance or by very specific changes to individual rules. In other areas, a more fundamental restructuring of our approach will be required. For example, we must acknowledge that many Canadians no longer view their financial relationships the way that securities regulation typically did – through the lens of individual investment or savings accounts – but rather as a portfolio held by one or more people in a household representing one or more generations. Similarly, as artificial intelligence and robotic process automation tools advance, IIROC’s rules must welcome the capabilities they give investors while simultaneously ensuring that regulated firms and individuals retain ultimate accountability.

Implementing such changes – particularly when combined with other regulatory reforms already identified by our research or proposed by our regulatory partners at the Canadian Securities Administrators (CSA) – will be a major undertaking. Fortunately, IIROC has set the stage for such changes by completing its multi-year plain-language rewrite of the IIROC rules. The revised rulebook, which governs the activities of dealers and which, together with IIROC’s existing Universal Market Integrity Rules, forms our regulatory framework. Now approved, the new rulebook will come into force over the following year, providing the modern architecture needed to evolve our rules alongside the changing needs of Canadians and the rapidly advancing business models and technologies of the industry.

Of course, the preparations for transformative change at IIROC over the last year were not limited to our oversight of the interactions that dealers have with individual Canadians. Working with Nasdaq SMARTS, we also launched the newest generation of the surveillance system that monitors activity in Canada’s debt and equity markets. We can now monitor up to one billion messages daily in real time and support cross-market, cross-asset and cross-trader surveillance and investigation. We have also significantly enhanced our operational efficiency by directly linking the surveillance system with a new integrated case management system, used by all IIROC regulatory departments, thus providing a single streamlined path for all cases from identification through investigation and, as necessary, enforcement.

We are also using our enhanced capabilities to support our regulatory partners at the CSA with the launch of their Market Analytics Platform (MAP) by implementing daily processes to securely transfer equity trade data from our Data Sharing Platform using secure cloud and “big data” capabilities.

IIROC not only regained market-leading surveillance capabilities with the launch of the new system, we planned for its future as well. We can now effectively and cost-efficiently integrate the surveillance of additional asset classes should we be called upon to do so as part of our public interest mandate.

For example, crypto-assets represent one emerging asset class where IIROC may be called upon to play a part. To begin to answer the question of what role, if any, IIROC should play, the CSA published jointly with IIROC a proposed framework for crypto-asset trading platforms. Interest in crypto-assets has grown rapidly, along with the recognition that the need to support innovation must be balanced with the appropriate safeguards for potential investors.

These initiatives all support our dual mission of protecting investors and supporting healthy Canadian capital markets. To best protect investors, it is not enough to have a modern, up-to-date regulatory framework, effective and efficient compliance oversight and state-of-the-art market surveillance capabilities. IIROC also needs the tools to permit thorough and effective investigations of potential violations and a sanctions regime with real consequences for those found to have abused the trust of their clients or the markets as a whole.

I am extraordinarily pleased to say that for the second year in a row, IIROC has made significant progress in obtaining the tools we need to do the job. Between April 1, 2018 and June 1, 2019, six provinces adopted legislation to augment our enforcement powers and all three territories enacted regulatory orders with similar effects.

To put this in context, when IIROC launched its efforts to obtain a complete enforcement toolkit in 2015, only Alberta and Quebec had granted IIROC the ability to enforce its disciplinary fines through the courts. Today, those two provinces are joined by Prince Edward Island, Ontario, British Columbia, Manitoba, Nova Scotia, the Yukon, the Northwest Territories, Nunavut, and Saskatchewan.

In addition, our ability to effectively pursue investigations has been augmented by the granting of statutory immunity in Alberta, Quebec, Prince Edward Island, Manitoba and Nova Scotia and the ability to require cooperation by third parties with our investigations and hearings in Alberta, Quebec, Prince Edward Island, Nova Scotia and, partially, in the Yukon and the Northwest Territories and Nunavut.

I am incredibly grateful for the trust, support and confidence in IIROC demonstrated by the actions of those governments and their respective securities authorities. We are using and will continue to use these tools in the public interest to protect Canadians. Over the next year, we will also continue to work with governments to ensure that we have a full set of tools across the country so that all Canadians from coast-to-coast benefit from an equal and high level of protection.

As we completed our last fiscal year and put in place so many foundational measures, IIROC was also finalizing our Strategic Plan for the coming three years. In planning and executing strategy, it is all too easy to be consumed by a vision of the future and thus to lose focus on the day-to-day.

IIROC Enforcement’s current legal authority and protections

IIROC has made significant progress in the following jurisdictions to strengthen investor protection:

Headshot Andrew J. Kriegler

I want to emphasize that IIROC’S Board of Directors, its staff and management are united in our determination to continue to efficiently and effectively execute on our core regulatory mandate as our highest priority. It is that focus and the strong results that have followed which have earned us trust with Canadians, our regulatory partners at the CSA and their governments. It is only that trust which gives us license to consider how else we might be able to deliver value for Canadians and the financial system.

Last year, in front of the Finance Committee of Quebec’s National Assembly, IIROC testified that an important part of the reason we have been successful at the role we have been given is because of our uniquely Canadian model. IIROC is a self-regulatory organization, one that features autoréglementation supervisée, or self-regulation combined with public oversight. We are both overseen and supported by our colleagues and partners in each of the CSA jurisdictions and it is by working together with them that we are most effective.

I am grateful to the Board of Directors for their support, their guidance and for their strategic vision. The experience and perspective they bring to the governance of our self-regulatory organization is critical and it has helped chart our course through this rapidly changing world.

Finally but perhaps most importantly, the Board joins me in thanking IIROC’s dedicated management and staff in Vancouver, Calgary, Montreal and Toronto. They are the ones who every day truly live our mission of protecting investors and supporting healthy capital markets. I am proud to be their colleague.

Andrew J. Kriegler Signature
Andrew J. Kriegler
President and CEO