Messages

Message from the Chair

Headshot Paul D. Allison

At the beginning of this fiscal year, IIROC published a new three-year strategic plan, the second since we adopted as our mission statement “Protecting Investors and Supporting Healthy Canadian Capital Markets.”

Among the seven strategies that support the plan are commitments to Delivering Value for Canadians and the Financial System and Supporting Industry Transformation. When the Board of Directors adopted the new plan, we knew that following through on all of our commitments would be critical to our success as a public interest regulator. We did not foresee the timetable upon which we would be called to deliver.

The economic, social and cultural impacts of the COVID-19 pandemic have been significant. To adapt to the realities of a socially distant, remote-working, contactless world, the pandemic forced a rapid acceleration of the already underway transformation in the way that Canadians consume financial advice and financial products. To respond to the needs of their clients, industry’s transformation accelerated as well, and the system needed regulators, including IIROC, to keep up.

While this ongoing transformation will undoubtedly be challenging, it is clear that the result will be an investment industry better able to serve Canadians and a more efficient self-regulatory model, one that is better equipped to protect investors and support healthy Canadian capital markets.

It is equally clear that IIROC’s strategy is the right one for this time. It has been battle-tested by rapidly changing expectations of investors, by changes in the business models, products and services offered by our members, by unprecedented market volatility and by the operational, regulatory and management demands of the pandemic.

Over the last fiscal year, IIROC completed the final phase of its systems infrastructure upgrade, vendor consolidation and cloud computing transition program, an ambitious but necessary overhaul of our information technology that vastly increased our capabilities and reduced our operating costs.

As a result, IIROC was well prepared to move to a 100% work from home (WFH) environment when that became necessary in mid-March 2020. Not only did employees seamlessly and securely continue their work from home, our systems and people were ready for a massive increase in equity markets activity – activity that peaked in late March at twice the previous recorded highs.

The Board of Directors is proud of the way that IIROC executed the transition to WFH and is pleased that our program of strategic investment in people and technology delivered on our obligations to investors, the industry and to Canadian markets as a whole. We also recognize the challenges of working from home and are grateful to all IIROC staff in all our offices across the country for their continued professionalism and commitment to serving the public interest while dealing with their own personal responsibilities and impacts of the pandemic.

We are equally proud of the way in which IIROC responded quickly to give industry the needed flexibility to serve Canadians in the unprecedented circumstances of the pandemic. Ensuring that investor protection was preserved, we moved quickly to support firms’ ability to continue delivering essential financial services across the country.

To adapt to the realities of a socially distant, remote-working, contactless world, the pandemic forced a rapid acceleration of the already underway transformation in the way that Canadians consume financial advice and financial products. To respond to the needs of their clients, industry’s transformation accelerated as well, and the system needed regulators, including IIROC, to keep up.

The lessons learned by the industry and by IIROC in these difficult times not only show us how to get through this period but also offer a roadmap to the future. The innovations, efficiencies and adaptations we uncovered are already illustrating to us the ways in which our regulation must evolve to keep pace with the needs of Canadians.

With the publication in June 2020 of our proposal Improving Self-Regulation for Canadians, we have put forward a roadmap for self-regulation as well. Developed through discussion with investors, investment and mutual fund dealers and advisors, professional bodies and industry associations, it offers a practical way forward, one that will benefit investors and industry alike and save hundreds of millions of dollars that would otherwise be spent on duplicative regulation.

We applaud our partners at the Canadian Securities Administrators for the leadership they have shown by launching their Consultation on the Self-Regulatory Organization Framework and look forward to working with them and our colleagues at the Mutual Fund Dealers Association on delivering real, tangible improvements to the system in the near term.

In addition to evolving the organization and its vision for self-regulation, the IIROC Board is itself evolving as the lives of our Directors take them in different directions. Over the past year, Independent Directors Shenaz Jeraj and Victoria Harnish succeeded Brian Heidecker who completed his term, and Lucie Tedesco who moved back into the practice of law on a full-time basis. Tim Mills joined as an Industry Director succeeding Rita Achrekar who, while no longer a member of the IIROC family, continues to serve the public as a Director of the Canadian Investor Protection Fund.

This September, three longstanding Independent Directors will come to the end of their terms: Catherine Smith, Ed Iacobucci and James Donegan. The Board, management and staff of IIROC thank them and all of our former and departing Directors for their wisdom and judgement these past many years.

We are fortunate to be able to nominate three exceptional new Directors with deep experience in investor, industry and capital markets issues: Malcolm Heins, Jennifer Newman and Laura Tamblyn Watts. It is expected they will be confirmed at our September 2020 annual general meeting.

In conclusion, I would like to thank all members of the Board for their counsel, dedication and support and to again express our collective appreciation to everyone at IIROC for their dedication. In uncertain times, they delivered on their mission as a public interest regulator which protects investors and supports healthy Canadian capital markets.

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

Report from the President and CEO

Headshot Andrew J. Kriegler

IIROC has long recognized that as the needs and wants of Canadians continues to evolve and as the financial sector continues to evolve with new products, services and business models in response, so too has the need to evolve ourselves as a self-regulatory organization (SRO).

We have improved IIROC each year, enhancing our ability to protect investors and to support healthy Canadian capital markets. With the support of colleagues and partners – the Canadian Securities Administrators (CSA), their respective provincial and territorial governments, the Bank of Canada and many others – IIROC’s role has broadened, enabling us to be more effective in our core mandate and to leverage our knowledge, skills and capabilities in support of a more efficient financial system.

I am proud to report that IIROC’s evolution has continued over the past year and to report on the progress we have made together.

Over the past fiscal year, we became more flexible and efficient as an organization, more effective as a public interest regulator and even more responsive to the needs of investors and the way in which industry serves them. Our ability to be flexible and responsive became ever more important as COVID-19’s disruptions rocked Canada’s economy and Canadian society.

The pandemic forced significant changes to how we all live and work. IIROC was well prepared for the move to fully remote work as we had just completed a multi-year investment in flexible, cloud-based technology infrastructure and had updated and regularly tested our business continuity plans. Our new capabilities not only supported all of our corporate needs and the regulatory oversight of IIROC’s members but also the distribution to work from home locations of all of the surveillance of trading in Canada’s debt and equity markets securely and effectively.

To give you one particularly important example, IIROC’s Information Technology team built out in each surveillance officer’s home the full suite of secure technology that they would have in our Toronto and Vancouver surveillance rooms, complete with video links to all of their colleagues.

Our continuing program of investment in people and technology – including the launch, in 2019, of a new state of the art surveillance system – meant that, even completely working from home, we were able to monitor nearly 1.4 billion equity transaction messages a day in real time. This level of activity was more than double the previous peak volume and almost five times the average pre-crisis volume.

The pandemic is having a dramatic impact on Canadians and, with limitations on traditional in-person contact, on the way they interact with all of their financial services providers, including IIROC’s member firms. In many ways, however, the pandemic simply accelerated the acceptance of tools, technologies and other innovations that were already in the process of being adopted.

I would like to commend IIROC member firms for their response to the pandemic. They have been working hard, in many cases under very difficult conditions, to continue to deliver financial advice, products and services to their clients. They have innovated, quickly and practically and have not only maintained the level of service to their clients but, through increased adoption of new tools and technologies, have increased it.

We moved quickly to give firms the flexibility they needed to serve their clients in this environment. IIROC’s Board of Directors approved a framework for granting rule exemptions in a range of areas where the implications of the pandemic made it difficult for firms to support their clients and fully comply with IIROC dealer member rules. Subject always to maintaining investor protection, our objective was to acknowledge the practical realities of the operating environment.

The myriad of challenges faced by investors, industry and regulators alike in these difficult times have brought with them some positive aspects and the impetus to keep moving forward. They have highlighted many new, more efficient and effective ways of doing business and serving Canadians. If we simply turn back the clock after the pandemic is over and go back to the old ways of doing things, we will have missed the opportunity to improve the system and ourselves and will deny Canadians benefits they have already had the opportunity to experience. Equally important, going backwards would condemn us to years more of inefficient, duplicative and overly burdensome practices.

Over the coming months, we will work with all of our stakeholders to propose rule amendments to ensure that the efficiencies and improvements that have been identified are not lost.

Of course, even before COVID-19 demanded such rapid innovation across our markets, IIROC had been working to understand the trends driving the evolution of financial advice and planning how our regulation should evolve to keep pace. Our joint report with Accenture, Enabling the Evolution of Advice in Canada, together with our investor study Access to Advice, conducted with The Strategic Counsel, confirmed that Canadians want access to a broader suite of products and services and equally want the ability to consume investment advice on their own terms.

Ensuring that we understand investor perspectives goes beyond just research. This year, IIROC’s Board of Directors amended its skills matrix to formalize the requirement for the Board to benefit from direct experience with consumer and retail investor issues.

I would like to commend IIROC member firms for their response to the pandemic. They have been working hard, in many cases under very difficult conditions, to continue to deliver financial advice, products and services to their clients.

I am very pleased that the group of Independent Director candidates for IIROC’s upcoming annual general meeting more than satisfies those requirements.

We also announced plans to establish an Expert Investor Issues Panel (EIIP). We will seek input on the panel in a notice for comments to be published later in 2020. The EIIP will enable individuals with a wide variety of experience and expertise related to investors to provide input into IIROC’s policy-making process, priorities and investor protection initiatives.

Over the past fiscal year, IIROC secured stronger enforcement powers in New Brunswick and Saskatchewan. They joined seven other provinces and all three territories in giving IIROC the improved ability to protect investors by holding wrongdoers accountable for their actions.

In keeping with the findings of our survey on vulnerable investors, we know suitability is an ongoing issue. We investigated and prosecuted cases where suitability represented the largest volume of such cases, with seniors and vulnerable investors representing one-quarter of cases reviewed and nearly one-third of all prosecutions. We remain committed to protecting all investors, and to ensuring that those who try to take advantage of our most vulnerable are held accountable while giving firms and advisors a “safe harbour” to help them do the right thing for their clients.

We plan to continue our pursuit of improved legal authority – and will also take steps toward advancing our new initiatives to give IIROC a tailored, proportionate disciplinary response and to better support investors who suffer losses.

Finally, I would be remiss if I did not discuss the long-awaited prospect of significant structural evolution in our self-regulatory structure. In June 2020, the CSA published a consultation document examining the SRO framework, which encompasses IIROC and the Mutual Fund Dealers Association of Canada (MFDA), a review that we welcome.

We believe that the time for structural change is now. After the CSA announced in December 2019 that they would conduct such a review, IIROC engaged a wide group of stakeholders including investors, investment and mutual fund dealers and advisors, professional bodies and associations to create a proposal for practical and significant change that would deliver tangible results for all market participants.

The views of this group formed a remarkable consensus. Virtually all agreed that to be successful, any proposal must:

  • Be positive for investors, regardless of where they live or how many assets they have;
  • Enhance investor protection;
  • Have a positive impact on dealers’ and registrants’ ability to serve Canadians, regardless of size or business model;
  • Reduce duplicative regulatory burden;
  • Be straightforward, simple and inexpensive to execute, with minimal disruption to Canadians, the industry, or the CSA oversight regime; and,
  • Position the SRO model for continued policy streamlining and evolution.

Our proposal achieves these objectives. It would bring IIROC and the MFDA together as divisions of a consolidated SRO as an important first step.

Over the next decade, this step alone would save hundreds of millions of dollars by reducing duplicative red tape and regulatory burden. Importantly, it will also lead directly to improved investor protection and better access to advice for Canadians, especially those in underserved or smaller communities.

The initial reactions have been strongly positive. We look forward to working with the CSA as they work through their process and with all of our stakeholders in this important transformation.

In closing, I would like to express my appreciation to our Board for their guidance as we navigate through these unprecedented times, and for supporting us and those we serve in this ongoing transformation. I would like to thank my colleagues at IIROC, our members and stakeholders.

As a pan-Canadian organization with staff working in various jurisdictions, I want to take a moment to echo Paul’s genuine appreciation for our colleagues who have continued to deliver on our public interest mandate with the highest degree of commitment, professionalism and responsiveness. I am proud of everyone’s efforts and our collective ability to protect investors and ensure our capital markets operate with integrity.

We believe that the time for structural change is now. After the CSA announced in December 2019 that they would conduct such a review, IIROC engaged a wide group of stakeholders.

To say the past few months have been unusual is an understatement. The pandemic put a harsh spotlight on areas we knew we needed to change and made it clear that the time for change is now. The same is certainly true of the launch of the CSA’s self-regulatory framework consultation.

Canadians deserve a better result from their SROs. In partnership with our colleagues at the MFDA and the CSA, we are committed to delivering it.

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

IIROC Enforcement’s current legal authority and protections


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

Click on the map for an interactive experience.

  • Authority to collect fines
  • Collect and present evidence
  • Statutory immunity
Enforcement’s current legal authority and protections
Province / Territory Date / Legal authority
Yukon November 2018: collect fines and collect/present evidence
Northwest Territories November 2018: collect fines and collect/present evidence
Nunavut November 2018: collect fines and collect/present evidence
British Columbia May 2018: collect fines
Alberta June 2000: collect fines
June 2017: collect/present evidence and statutory immunity
Saskatchewan May 2019: collect fines
Manitoba June 2018: collect fines and statutory immunity
Ontario May 2017: collect fines
Quebec June 2013: collect fines
June 2018: collect/present evidence and statutory immunity
New Brunswick December 2019: collect fines, collect/present evidence and statutory immunity
Nova Scotia October 2018: collect fines, collect/present evidence and statutory immunity
Prince Edward Island January 2017: collect fines
December 2018: collect/present evidence and statutory immunity