Successes Archive

Successes Archive

CEO Dashboard – Q4 2014
CEO Dashboard – Q3 2014
CEO Dashboard – Q2 2014



CSA Accepts Key IIAC Recommendations on Early Warning Proposals

On October 10, 2014 the CSA issued an update to market participants on the status of the Draft Amendments to National Instrument 62-103 Early Warning System and Related Take-Over Bid and Insider Reporting Issues. The IIAC commented on the proposals in the summer of 2013. Consistent with IIAC recommendations, the CSA has advised that it will not proceed with (A) the proposal to reduce the reporting threshold from 10% to 5%, and (B) the proposal to include “equity equivalent derivatives” for the purposes of determining the threshold for early warning reporting disclosure. The final amendments to the National Instrument are expected to be published in the second quarter of 2015.



CRM2 Implementation

In July 2013, the Canadian Securities Administrators (CSA) introduced new amendments requiring registered firms to provide investors with enhanced client statements effective July 15, 2015, and better disclosure around fees and investment performance effective July 15, 2016. Meeting these so-called Client Relationship Model Phase 2 (CRM2) requirements will heavily depend on firms’ ability to update and upgrade their relevant technology and integrate their systems, and to educate and train their advisors so they can effectively address their customers’ questions and concerns—all in all, a costly, complex and challenging initiative. The IIAC led the push for implementation dates to align with the calendar year. Our efforts paid off. In January 2015, the CSA announced that it will give the industry to the end of 2015 to adopt the CRM2 requirements that were due to take effect on July 15, 2015. Additionally, firms that provide performance reports for calendar 2016 will not be required to include comparative data from 2015 in those reports. Firms will be able to base their first investment performance reports on 2016 information alone. Overall, the IIAC’s efforts resulted in a smoother and more efficient transition. Basing the first performance reports on 2016 information only will free up time and resources for firms to accomplish other objectives.

Disciplinary Sanctions

The IIAC supports the efforts of the Investment Industry Regulatory Organization of Canada (IIROC) to provide transparency to Dealer Members regarding the general principles and key factors for determining appropriate disciplinary sanctions in the event of regulatory misconduct by registered employees. However, the IIAC was concerned with the language of an IIROC Policy Statement (released for comment in November 2013) which stated that firm-imposed disciplinary action (i.e. fine or suspension) may reduce regulatory sanctions arising from IIROC disciplinary proceedings. The IIAC stressed that internal discipline should be a key factor for the Hearing Panel to consider in determining an appropriate sanction. In January 2015, the IIROC Staff responded positively to the IIAC’s concerns. The IIROC Staff acknowledged that internal discipline is an important factor for the Hearing Panel to consider, and recognized the value and importance of internal discipline in a Dealer Member’s efforts to foster a culture of regulatory compliance. As a result, dealer Members now have assurance that a credit will be accorded for any fine or suspension that may have been imposed upon an individual respondent as a result of internal disciplinary action. This will prevent some respondents from receiving disproportionate sanction.

Specified Foreign Property (SFP) Tax Reporting

Form T1135 must be completed and filed with the Canada Revenue Agency (CRA) by all Canadian-resident taxpayers that hold specified foreign property (SFP) exceeding C$100,000 at any time during the year in an account with a Canadian registered securities dealer or a Canadian trust company. This Form has created significant challenges for taxpayers and tax preparers. The CRA relieved some of the filing burden by adopting a streamlined reporting option that allows taxpayers to report the aggregate value of all such property on a country-by-country basis. There is no need to segregate the SFPs by categories (e.g. shares, debt of foreign governments, interest in foreign rental properties etc.). The total value to be reported is the highest month-end fair market value during the year (that appears on the investment statement) as well as the fair market value at year end. This aggregate reporting is done in a newly-created Category 7 on the Form T1135. This streamlined reporting method, while welcomed, created confusion in interpretation and methodology. The IIAC produced a worksheet showing the correct way to calculate aggregate fair market value of SFP by country. It was reviewed and approved by the CRA in early 2015, just in time for the tax reporting season. The worksheet was made available online on IIAC’s members-only website in advance of being posted on the CRA’s website. The IIAC’s leadership resulted in a reduction in the tax compliance and administrative burden for 2014 (and later taxation years). Canadian registered securities dealers have a new value-added tool, the IIAC’s worksheet, to assist their clients who have some foreign investments in their portfolio. The IIAC’s worksheet is particularly useful for small dealers that are asked to help taxpayers provide information necessary to complete the Form T1135.

Registered Plans – Tax-Free Savings Accounts (TFSAs)

More than 11 million Canadians have a Tax-Free Saving Account (TFSA). In 2011, the Harper government promised to double the TFSA annual contribution limit (from $5,000 to $10,000) once the budget is balanced. Some argued that a doubling of the annual contribution limit would only benefit the wealthy and, therefore, the government should not proceed. The IIAC argued that higher household saving provides funds for new capital investment and business expansion needed to promote economic growth. Additionally, accumulated TFSA savings will eventually be spent, generating further economic activity and new tax revenue. The 2015 federal budget increased the TFSA annual contribution limit to $10,000, effective for the 2015 and subsequent taxation years. The increase in the TFSA contribution room opens up new retirement income planning possibilities, particularly for clients 65 years of age and over who account for roughly one-quarter of TFSA holders, and especially clients over the age of 71—i.e. the 1.5 million of which have a TFSA—who can no longer contribute to a RRSP.

Registered Plans – Registered Retirement Investment Funds (RRIFs)

Since 1992, Canadians with Registered Retirement Investment Funds (RRIFs) are required to withdraw a set minimum percentage from their account annually. With life expectancy steadily increasing and real returns on investments expected to remain low, many Canadians face a significant risk of outliving their savings. The IIAC called on the federal government to eliminate the rules mandating minimum yearly drawdowns from RRIFs and similar accounts. While minimum annual withdrawal requirements were not entirely eliminated, the government did announce in the 2015 federal budget lower RRIF minimum withdrawal requirements for individuals age 71 to 94 inclusive. This measure will apply for the 2015 and subsequent taxation years. Seniors now have more flexibility and longer income tax deferral. According to Finance Canada, a 90-year old will have 50 per cent more capital as a result of the changes. With more capital to work with, clients can have a wide-ranging portfolio of retirement investments under the umbrella of a RRIF.

Existing Security Holder Prospectus Exemption

On November 27, 2014, the OSC announced that it will adopt the existing security holder prospectus exemption for reporting issuers listed on the TSX, TSXV, CSE or Aequitas NEO Exchange. Subject to Ministerial approval, the exemption will come into effect on February 11, 2015. The exemption will allow listed reporting issuers (excluding investment funds) to raise capital from existing security holders on a cost effective basis by permitting existing retail security holders to acquire securities of the issuer directly, rather than through the secondary market. The IIAC advocated for the creation of the exemption, which was adopted in other Canadian jurisdictions last year, and strongly encouraged the OSC to implement the exemption as part of its proposal to create new exemptions in Ontario.

IIAC Worksheet for T1135 Foreign Security Holdings Accepted by CRA

Form T1135 must be completed and filed with the Canada Revenue Agency (CRA) by all Canadian-resident taxpayers that hold specified foreign property (SFP) exceeding C$100,000 at any time during the year in an account with a Canadian registered securities dealer or a Canadian trust company. This Form has created significant challenges for taxpayers and tax preparers. The CRA relieved some of the filing burden by adopting a streamlined reporting option that allows taxpayers to report the aggregate value of all such property on a country-by-country basis. There is no need to segregate the SFPs by categories (e.g. shares, debt of foreign governments, interest in foreign rental properties etc.). The total value to be reported is the highest month-end fair market value during the year (that appears on the investment statement) as well as the fair market value at year end. This aggregate reporting is done in a newly-created Category 7 on the Form T1135. This streamlined reporting method, while welcomed, created confusion in interpretation and methodology. The IIAC came to the rescue. It produced a worksheet showing the correct way to calculate aggregate fair market value of SFP by country. It was reviewed and approved by the CRA in early 2015, just in time for the tax reporting season. The worksheet was made available online on IIAC’s members-only website in advance of being posted on the CRA’s website.

CSA Publishes Final Fund Facts Delivery Rules

Several IIAC recommendations incorporated into the final amendments

Personal Financial Dealings

As a result of IIAC advocacy, IIROC agreed to substantially revise its Personal Financial Dealings Rule, despite having been released in final form with set implementation dates. As a result of IIAC member firm concerns, IIROC agreed to narrow the scope of the rule so that some specific prohibited personal financial dealings and related exemptions will only apply to Registered Representatives (RRs) and Investment Representatives (IRs) (and not all member firm staff). In addition, IIROC has eliminated the requirement for an RR or IR to disclose to, and obtain pre-approval from the firm in the case of borrowing or lending with a client who is a related person. In addition, IIROC will now allow RRs and IRs to act as a client’s trustee or executor for not only related persons (previously permitted) but also for non-related clients, subject to some supervisory controls.

CRM Performance Reporting

The IIAC won amendments from the Canadian Securities Administrators to its draft performance reporting proposal to allow use of both book and original cost, extend timelines for implementation, provide some exemptions for deferred sales charge disclosure and reflect other key recommendations. The IIAC convinced IIROC to delay implementation of the client relationship model enhanced suitability requirement until March 26, 2013.


The IIAC held a nationwide webinar and a series of well-attended CRM events in Vancouver, Calgary, Toronto and Montreal, bringing additional clarity regarding CRM requirements to Member firms and enabling firms to share practices, in particular the enhanced suitability components. The IIAC helped Member firms prepare to meet the CRM requirements by: Developing a relationship disclosure (RD) considerations document; sharing results of a Member firm survey on RD preparations to help firm decision-making; hosting an RD roundtable of IIAC members; and publishing a self-assessment tool to help Member firms identify material conflicts of interest, and develop methods to address conflicts, including disclosure.

CRM2 Disclosure Requirements

With CRM2 disclosure and reporting rules to be implemented over three years, the IIAC developed an extensive Member Support program, including seminars, roundtables, surveys, working groups and an online CRM2 Toolkit featuring a Plan-on-a-Page, data maps, presentations, and more. The goal of this program is to provide additional support to Member firms, including reducing the cost of implementation and increasing the compliance comfort level.

Large Open Position Reporting (LOPR)

The IIAC worked extensively with Member firms and the Bourse de Montréal Regulatory Division over several years to implement new large open position reporting (LOPR) requirements for options and futures. The IIAC successfully convinced the Montreal Exchange Regulatory Division of the privacy requirement to eliminate the need for Member firms to use segments of social insurance numbers as identifiers for LOPR requirements. Once there was agreement on detailed LOPR requirements, the IIAC achieved a much-needed eight-month implementation extension until the end of 2013. This helped members implement the rules more cost-efficiently and avoid reprimands for lack of compliance. Separately, the IIAC persuaded the Bourse de Montréal Regulatory Division to implement an IIAC request to make position limits available in Excel, thereby replacing uncopiable PDFs. This saved members time and the risk of error from having to manually input limits.

Registered Plans

The IIAC persuaded the Canada Revenue Agency to delay RRSP and RRIF non-qualified investment reporting by three months. The IIAC successfully influenced the Department of Finance’s decision to provide investors with a six-month reprieve from penalties with respect to “prohibited” investments in RRSPs and the right to swap out these holdings for cash. The IIAC persuaded the CRA to formally advise Member firms who are unable to contact TFSA-holders to reconcile Member firm and CRA TFSA data, to de-register these TFSAs and issue tax slips for the income earned. The IIAC’s efforts led the CRA to eliminate new partnership filing requirements and agree that Member firms may re-use TFSA contract numbers by adding the account opening year to the number rather than expanding the numbers’ digits.

Tax Reporting

The IIAC worked successfully with the fund and insurance associations to persuade tax authorities to postpone new requirements to issue potentially hundreds of thousands of additional foreign income and tax withheld slips to clients. CRA and Revenu Québec (RQ) withdrew proposals that would have reduced the number of tax slips combined on one printed page from three to two, and required the printing of 8½” x 14” (legal) size slips to accommodate increased Quebec reporting. The IIAC was successful in reversing these proposals. The IIAC persuaded the CRA to change the location and size of NR300-series form numbers to improve form usability. We estimate that system programing, printing and mailing cost savings derived from the above advocacy efforts resulted in $2 million dollars in savings to the industry.

U.S. Tax – Administrative Issues

The IIAC worked with the IRS to solve a number of administrative issues related to complex IRS Form 3520 filings for U.S. persons who hold certain registered accounts in Canada (e.g. RESPs), and will continue to work with the IRS to simplify these filings in upcoming years as these accounts represent a very low risk of use for tax evasion purposes and the forms are extremely complex and confusing, which can result in potential IRS penalties to clients of IIAC member firms if filed incorrectly.

U.S. Tax – Cost Basis Reporting

In February 2014, the IRS issued revised regulations coordinating the requirements of the existing Chapter 61 (existing U.S. tax reporting) and proposed Chapter 4 (FATCA reporting) regimes. These regulations clarified that non-U.S. payors (provided that they are reporting Model 1 FATCA IGA financial institutions (FIs) and complete the necessary FATCA reporting) will no longer be required to complete IRS Form 1099 reporting that would be duplicative for those accounts. This effectively means that Canadian brokers who choose to opt out of Form 1099 reporting will be able to avoid the onerous IRS cost basis reporting requirements under section 6045 of the Internal Revenue Code, including those that would require the cost basis of debt and options to be reported on Forms 1099 beginning on January 1, 2016. Implementing these changes would have been extremely costly to IIAC members.

CRA/Agence du Revenu Quebec

The IIAC established a CRA point person to advance and expedite resolution of Member firms’ issues within the federal tax authority, the first industry association to have such a facilitator. The IIAC co-ordinated a survey of Member firms with Montreal Exchange shares to facilitate a reasoned response to the questioning by CRA auditors in one region of Canada of the value of the shares. The IIAC facilitated challenging discussions among industry members, the CRA, service providers and infrastructure to better manage the combination and XML-ization of limited partnership unit tax reporting to clients. These efforts enabled Member firms to educate CRA on the complexities of systems changes and continue to press for early information regarding changing tax requirements. As IIAC Member firms can experience losses when trying to comply with a CRA “requirement to pay” (RTP), the IIAC successfully persuaded the CRA to provide significantly greater clarity regarding practices and procedures surrounding these demands to remit tax amounts owed by a client to the CRA, improving clarity and helping members avoid future losses. The IIAC posted on its members-only site a CRA-approved IIAC template relating to a new streamlined process designed to help client recover withholding tax. This is necessary when a non-resident client moves from a higher- to a lower- withholding tax jurisdiction and only later advises the member firm of the move. Formerly, the CRA’s procedure required one NR7-R form per payment on which tax was over-withheld. The new process is faster, more efficient and less costly for investors, the CRA and IIAC member firms. The IIAC, working in conjunction with the Investment Funds Institute of Canada (IFIC), successfully lobbied Revenu Québec and the CRA to defer by at least another year any requirement to report on revenue and income by source country, avoiding unnecessary cost and client irritation and significant systems changes late in the tax season. These efforts saved member firms approximately $2 million. These efforts also resulted in the CRA ceasing its practice of automatically charging late filing penalties and interest, totalling more than $200,000 annually. The IIAC prepared a Member-firm only toolkit for easy bulk reclaiming of late filing penalties and interest, charged due to issues beyond dealers’ control. The IIAC and IFIC were successful in building a larger stakeholder group to expand the effectiveness of the relationship with the CRA and RQ at senior levels, leading to more timely answers, greater flexibility, earlier involvement in consultations and greater trust. CRA is seeking IIAC’s feedback on NR301 forms and other form changes and Revenu Quebec is doing the same. In addition, the IIAC persuaded the CRA to extend the timeline for addressing unmatched TFSAs by four months allowing Member firms to focus on completing the tax reporting season, avoiding overtime to meet requirements. Finally, the IIAC obtained CRA approval for non-qualified investment reporting to be made by CD-ROM rather than the CRA’s requiring a rushed move to XML.

Due Bills

The IIAC played an instrumental role in implementing the ‘Due Bill’ framework, improving client holding valuation accuracy when securities undergo a major corporate action event (e.g., stock split or spin-off). The IIAC created a short document to explain the impact of the Due Bills initiative on holders of securities undergoing one of these events.

Non-Resident Tax Issues

The IIAC provided non-resident tax certification wording that could be included, after internal review and approval, in members’ know your client – or other account opening – documentation. The IIAC led an initiative to develop single distributor and manufacturer agreements, and an agreement posting facility on the FundSERV website, for non-resident tax information collection to avoid costs and client service challenges of fund managers and dealers asking the same clients for tax certifications.

U.S. Snowbirds

The IIAC published U.S. snowbird and temporary resident exemption guidance on U.S. states with regulatory relief for Canadian broker-dealers with Canadian clients who have self-directed retirement plans or are present temporarily in a particular state.

2014 CRA Form T1135 – Foreign Income Verification

The IIAC relentlessly pursued the CRA to make changes to requirements for clients completing T1135s – Foreign Income Verification statement – with respect to their holdings of foreign securities. Despite every expectation that the CRA would not change its position, the Agency provided transitional relief for securities dealers, and a simplified reporting method for clients, in late February 2014. This saved member firms hundreds of thousands of dollars at a minimum. Although it’s anticipated that some reporting changes will be required, they will be substantially less onerous than what would have been originally required. This win is a direct result of the IIAC’s advocacy efforts. The IIAC’s standing with the Chartered Professional Accountants Canada (CPA Canada) increased significantly as a result of this process, as CPA Canada had unsuccessfully pursued a similar change. This relationship will be used to promote education of the accounting industry, in which a number of accounting firms criticize dealers for reporting delays beyond the dealers’ control. This will also help the IIAC communicate with CPA Canada regarding the challenges that accountants can help solve.


The IIAC successfully co-ordinated ETF dealer interactions with regulators, ETF producers and vendors to achieve the most cost-effective implementation of new ETF Summary documents (similar to a mutual fund Fund Facts). The IIAC also managed the negotiation of a common rebate rate to be paid by ETF managers to dealers and the automatic charging of new ETF producers without market disruption. This new rebate set a precedent that dealers hope to use to change the fund manager/dealer compensation model.

2013 Adjusted Cost Basis Matrix/Asset Classification

The IIAC publicized an industry adjusted cost basis matrix and an asset classification schema to promote greater consistency among Member firms and across the broader investment industry. These tools will be updated periodically.



Binary Options

Binary options have surged in popularity in recent years. They are a type of options contract in which the payout depends entirely on whether the price of a particular asset that underlies the binary option rises above or falls below a specified amount, at a specific time, on a particular day. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Much of the binary options market operates through Internet-based trading platforms (many based overseas) that are not registered to conduct business in Canada and are not complying with applicable regulatory requirements. The IIAC is aware of numerous unregistered trading platforms currently soliciting Canadians, and of Canadians complaining of fraud associated with Internet-based trading platforms that buy or trade binary options. The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades. The IIAC voiced its concerns to the Canadian Securities Administrators (CSA). Regulators listened to the IIAC’s concerns. In March 2015, the CSA issued an Investor Alert warning investors to exercise caution when considering an investment in binary options. The CSA published a black list of 37 unregistered trading platforms currently soliciting Canadians. It encouraged all Canadian investors to visit to check the registration of any person or company offering binary options, and to contact their local securities regulator if they have invested with these or other offshore binary options trading platforms. The IIAC will continue to work with regulators to tighten their controls on those who subvert our marketplaces and enrich themselves at the expense of Canadian investors. Our efforts recognize and support the registered trading platforms and the strong and honest reputation of the registered broker-dealers operating in Canada who are leaders in providing investors financial protection and transparency.

Committed Orders

In October 2011, the Bourse de Montréal announced its intention to facilitate electronic prearranged transactions and cross transactions for eligible options and futures contracts listed on the exchange. To enable this, it published for comment proposed rule changes. However, divergent views among participants as to the impact of the proposed rule changes on the market had led to a stalemate. The IIAC and its Derivatives Committee were instrumental in kick-starting the dialogue among participants and with regulators. Our efforts were rewarded. On May 7, 2015, the Rules and Policies Committee of Bourse de Montréal announced it is implementing the changes effective June 26, 2015. Approved participants—i.e. dealers—will be able to execute prearranged transactions and cross transactions without execution risk. This will enhance liquidity in the Canadian derivatives market and should foster growth of the institutional options and futures market.

Updated Guidelines for Underwriting Fees

In its updated Fee Model Guidelines published on December 4, 2014, IIROC included several changes to its collection of Underwriting Fees as recommended by the IIAC. Changes include reducing the proposed cap on underwriting levies from 5% to 2.5% of Total Revenue to the dealer; excluding deposit notes from being considered a distribution of securities; and, clarifying the definition of “revenue” in the guidelines.

Third-Party Electronic Access to Marketplaces

IIROC Grants Extensions on Request for the Updating of Client Agreements for Third-Party Electronic Access to Marketplaces. The final rules respecting third-party electronic access to marketplaces that became effective March 1, 2014 require that the written agreements required to provide Direct Electronic Access or a Routing Arrangement must include certain mandatory terms. Members were provided a further 180 days from the effective date of the rules (i.e. to September 1, 2014) to bring agreements that were in place before March 1, 2014 into compliance with the requirements. The IIAC’s influence in obtaining this extension was acknowledged by IIROC in its Notice dated August 13, 2014 which stated: “IIROC received a letter dated August 6, 2014 from the Investment Industry Association of Canada (the “IIAC letter) on behalf of its members advising that, while its members are confident that they will be able to bring pre-existing agreements into compliance with the requirements, meeting the September 1, 2014 deadline will be challenging. The IIAC letter requests that IIROC provide a further 60 days to allow time for Participants to complete the necessary work.” As a result, IIROC agreed to grant a 60-day extension to October 30, 2014, to those Participants who are unable to meet the September 1, 2014 deadline. Any extension granted applies to pre-existing agreements only, and must be done by application to IIROC. The details of application are in the Notice.

Limitation of Permitted EMD Activities

In the proposed amendments to NI 31-103 Registration Requirements and Exemptions, the CSA indicated its intention to significantly restrict the activities that can be undertaken by Exempt Market Dealers. The proposals would end the ability of EMDs to trade securities that are listed on exchanges, undertake underwritings. It also increases the proficiency requirements of EMD CCOs. These amendments are critical in recognizing the differences in standards between IIROC Dealers and EMDs, and establishing a more level playing field so that less-regulated entities cannot directly compete with IIROC dealers.

Short-Term Debt and Securitized Products

In its Notice of Publication and Request for Comment of Proposed Amendments to National Instrument 45-106 Prospectus and Registration Exemptions Relating to the Short-term Debt Prospectus Exemption and Proposed Securitized Products Amendments (the Proposed Amendments), the CSA agreed with our concerns as stated in the IIAC’s 2011 submission that a separate system of regulation for securitized products would: severely curtail the use of securitization as a funding alternative; be unnecessarily burdensome on an industry already struggling to keep pace with regulatory reforms; and unjustly stigmatize securitized products as an investment option to the detriment of Canadian investors. The CSA has acknowledged that its 2011 Proposal was a disproportionate response to perceived deficiencies in the existing system and focused on regulating risk that did not exist in the Canadian securitized product marketplace. In our submission, the IIAC successfully argued that the CSA’s 2011 Proposal would upset the balance between ensuring investors are protected, while still having access to these products. The CSA agreed with the IIAC’s position that investor protection concerns did not warrant the comprehensive regulatory intervention it had originally contemplated. Of equal significance to the industry is the fact that the CSA also agreed with the IIAC that it needed to address the regulation of ABCP as outlined in our 2009 submission. The CSA accepted our proposal for additional disclosure in terms of a monthly Information Memorandum, timely disclosure for material changes as well as requiring two credit ratings. Further, our proposal suggested that ABCP backed by synthetic assets should not be eligible for the short-term debt exemption although these products could rely on other prospectus-exemptions. This is a very important win for the industry because it continues to ensure cost-effective issuances of ABCP, while balancing the need for investor protection by way of more robust disclosure.

U.S. Tax – Dividend Equivalents

IRS adopted IIAC recommendations to extend the implementation date for U.S. tax withholding rules on payments deemed to be U.S. dividend equivalents (including certain options and forwards) to January 1, 2016, avoiding an expansion in payments subject to withholding. The IRS is also attempting to re-draft and simplify the proposed regulations governing the identification of U.S. dividend equivalents, based on comments made by IIAC and other industry participants, which would greatly reduce implementation and administrative costs.

2013 IIAC NI 24-101 – Institutional Trade Matching Posting Facility Update

The IIAC followed up with Member firms and counterparties to obtain updated or re-confirmed institutional trade-matching statement, helping them with their due diligence and facilitating compliance. This will become a greater focus of regulators following the announcement that the U.S. (and hence Canada) will again pursue a shorter settlement cycle.

Central Counterparty Facility (CCP)

The IIAC spearheaded an initiative to launch a fixed-income central counterparty facility, named systemically important by the Bank of Canada, greatly improving Canadian-dollar core funding markets and the financial system’s resiliency to shocks. IIAC leadership further culminated in the successful implementation of Phase 2 of the CCP, adding further functionality to the service and bringing additional efficiencies to the marketplace. The objectives of this initiative are to reduce systemic risk while delivering significant balance sheet relief to IIAC Member firms that are participants of the CCP.

Security Lending Program

IIAC representations to the Bank of Canada resulted in changes to its securities lending program as recommended, contributing to more liquid funding markets and providing IIAC Member firms increased flexibility in their collateral management activities related to this program.

BCSC Publishes Conditions of Registration for Firms Trading OTCBB Securities

On December 18, 2014, the BCSC published the latest Conditions for Registration for firms that trade OTCBB. Consistent with the IIAC’s strong recommendations (made in December 2013) there is no longer a provision banning certain high-risk business with financial institutions in jurisdictions that are non-signatories to the IOSCO Multilateral Memorandum of Understanding.

Hong Kong Tax Treaty

IIAC efforts pressing for the finalization the Canada-Hong Kong Tax Treaty came to fruition with the passage of the new tax treaty, ideally expanding investment opportunities for Member firms in China and with new Canadians in Canada.



Common Reporting Standard (CRS) for Automatic Exchange of Tax Information

On July 21, 2014, the OECD released the Standard for Automatic Exchange of Financial Account Information in Tax Matters. It calls on governments to obtain detailed financial account information (including account balances, interest, dividends and sales proceeds from financial assets) from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis to help combat cross-border tax evasion and protect the integrity of the tax systems. Canada is one of more than 90 tax jurisdictions that have committed to implementing the CRS. More than 40 of these countries (not including Canada) pledged to achieve automatic information exchanges in 2017 (i.e. the early adopters). The IIAC proposed to the federal government that it start collecting data in mid-2017 and start sharing it in 2018. In the 2015 federal budget, the government announced that the CRS will be implemented on July 1, 2017, allowing for the first exchange of information in 2018—exactly what the IIAC had asked for. The CRS effective implementation dates will provide Canada’s financial services sector time to prepare, particularly as it continues to adapt to the requirements of the U.S. Foreign Account Tax Compliance Act (FATCA).

Final guidance on underwriting due diligence

IIROC’s final guidance on underwriting due diligence outlines common due diligence practices and suggestions for IIROC dealers involved in offering securities to the public as underwriters. The final guidance reflects essentially all IIAC recommendations made in a submission from June 2014.

Final NI 31-103 Amendments Reflect Several IIAC Recommendations

The IIAC is pleased to announce that amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, released October 16, reflect several IIAC recommendations made in March 2014.

EMD CCO Proficiency

The CSA accepted the IIAC’s position that EMD CCOs should meet certain experience and educational standards. NI 31-103 mandates 12 months of experience within the previous three years, and completion of the Exempt Market Products and PDO exam for CCOs. EMD Permitted Market Activities – Exempt Market Dealers will be prohibited from undertaking certain “brokerage activities”. For example, EMDs will now be restricted from dealing in exchange-listed securities and cannot act or solicit in furtherance of selling a security by a client that acquired a security under a prospectus exemption. In addition, EMDs cannot participate in a prospectus distribution except under specific prospectus exemptions. NI 31-103 amendments also include the removal of the “non-solicitation exemption” for trades in exchange contracts in Alberta, British Columbia, New Brunswick and Saskatchewan. These were previously widely used by U.S. FCMs to deal with Canadian investors in U.S.-listed derivatives and follow the release of a recent OSC staff notice that also limited the activities of non-registered dealers in Ontario. This is a very positive development for IIAC member firms. The IIAC has long advocated that these exemptions were antiquated and that IIROC-regulated dealers can provide Canadian investors access to listed derivatives markets across the globe. In addition, certain IIAC recommendations related to the activities of non-registered foreign dealers, filing of increased share ownership and outside business activities were also accepted by the CSA.


Responding to pressure from the IIAC and its international association counterparts, U.S. Treasury extended FATCA’s general implementation and grandfathering dates from January 1 to July 1, 2014, averting major disruption to financial services and the capital markets. Through its ongoing dialogue with the Canadian Department of Finance and the CRA, the IIAC successfully argued for significant relief from onerous FATCA registration requirements for personal trusts, and for exemptive relief for registered savings plans and other types of low-risk accounts, thereby reducing significantly the scope and costs related to FATCA compliance for member firms.

Existing Security Shareholder Exemption

The majority of CSA members (excluding Ontario) have approved a new prospectus exemption for existing security holders. The exemption is intended to assist smaller issuers to raise capital from existing shareholders on an expedited and cost efficient basis without the need for a disclosure document or onerous qualification criteria. Purchases in excess of $15,000 will require an IIROC dealer involvement to ensure investors are adequately protected.

IIROC Guidance on Outsourcing

The proposed IIROC guidance on outsourcing was significantly scaled back and clarified to ensure that onerous restrictions and requirements did not apply to many activities to which dealers routinely outsource to third party providers. The initial proposal potentially restricted or created impractical supervision and verification requirements in respect of many activities that dealers do not undertake in house.

CDS Bond Pricing Service

IIAC representation to CDS resulted in changes to the CDS Fixed Income Pricing Service. The changes addressed industry concerns pertaining to some market inefficiencies resulting from the Service.

Anti-Money Laundering

The IIAC obtained relief from the Department of Finance for anti-money laundering identification and record-keeping requirements for listed corporations, which reduced the AML burden for member firms.

Anti-Spam Regulations

On December 4, 2013, the federal government released its final Anti-Spam Regulations to the 2010 Legislation (known as CASL). The CASL Regulations contain significant concessions from what was proposed and reflects many of the IIAC’s comments in our submissions on this matter over the past number of years. The concessions in the Regulations represent a significant win for Canada’s investment industry. Most important, the CASL Regulations now provide an exemption which allows for referrals, meaning advisors can still contact potential clients when a specific referral is provided. There is also a provision for sharing contact lists. In addition, a business-to-business exemption has been included, which addresses many practical administrative difficulties proposed in the original Regulations. The Regulations also include a broadened definition of family and personal relationships, which more realistically reflects the nature of such relationships. Publication on social media sites was also specifically excluded from the Regulations and express consents, obtained in compliance with Privacy Regulation before the Regulations come into force, to collect or use electronic addresses to send commercial electronic messages will be recognized as being compliant with CASL. The IIAC has worked with counsel and IFIC to develop an industry wide compliance toolkit to assist members in complying with this regulation. We will be following up shortly with a webinar.

CTO Database

The IIAC secured changes to the CSA’s Cease Trade Order (CTO) Database guidance that removes stock symbols of de-listed issuers and achieves standard formatting of CUSIPs and dates, and consistent and accurate company names.

Freedom of Information

The IIAC’s co-ordination of a response to a Freedom of Information request for competitive data regarding Alberta-based firms successfully stopped securities commission disclosure of sensitive competitive information.

Shareholder Communications

IIAC’s active involvement in modernizing CSA rules governing shareholder communications contributed to a revised National Instrument 54-101 creating a “notice-and-access” mechanism, promoting online access to proxy documents, and greatly reducing the volume of unwanted paper received by investors and related printing and mailing costs incurred by the investment industry.

Financial Transaction Taxes (FTTs)

The plans for 11 European countries to implement an EU FTT have been significantly delayed beyond the intended start date of January 1, 2014 – and perhaps longer if they cannot complete an agreement and pass legislation by May 2014. The IIAC has corresponded with Canadian government on a number of occasions to express our concerns about the extraterritorial aspects of European transaction taxes and the operational impact on Canadian dealers, particularly with respect to the extremely short implementation periods, and urging Canada to show leadership among its counterparts internationally to resist an overly broad implementation of FTT to financial transactions globally, and to consider the detrimental and distortive effects of FTT on global capital markets and Canadian investors.

Federal Government Relations

On December 4 and 5, 2013, an IIAC delegation including Ian Russell, IIAC President and CEO, Managing Directors Andrea Taylor, Jack Rando and Richard Morin, and the Board of Directors traveled to Ottawa to provide policymakers with an update on the current state of the securities industry and to discuss issues on the federal policymaking agenda, including improving the capital raising process in Canada. Meetings were held with: the late Honourable James Flaherty, then Minister of Finance, and Finance officials; senior Bank of Canada officials, including Governor Stephen Poloz and former Deputy Governor Tiff Macklem; and members of the House of Commons Standing Committee on Finance. These annual meetings between the IIAC staff, Board and policymakers are critical in ensuring that the industry’s issues are understood and taken into consideration when future program and policy changes are being developed.