IIROC orders all firms to review liability clausesBy The IJ Staff | October 15 2019 01:30PM
The Investment Industry Regulatory Organization of Canada (IIROC) published guidance recently, advising firms to review their retail client account agreements and to change or remove clauses that absolve them of liability. IIROC says clauses that raise regulatory concern in particular are those which limit a firm’s liability for losses, even when those losses are caused by the firm. They say clauses which relieve a firm of its securities law obligations are also inconsistent with IIROC’s rules and a firm’s regulatory obligations.
“It is inappropriate for any contractual clause to unreasonably limit or wave a firm’s liability for losses when that firm is in breach of its regulatory obligations,” says IIROC president and CEO, Andrew Kriegler. “Investor protection is a core obligation of all IIROC-regulated firms and clauses like this that attempt to absolve firms of this obligation are simply unacceptable.”
IIROC says, effective immediately, firms are encouraged to review and revise inappropriate limitation of liability clauses in retail client agreements, and to notify clients of changes. It says in upcoming examinations, IIROC will review agreements and flag any issues. Depending on the severity, the regulator will recommend corrections. In egregious cases, they will also refer the matter for investigation and possible disciplinary action.
“We are of the view that clauses which purport to limit liability, in whole or in part, for losses, including losses resulting from a breach by the dealer of their obligations under IIROC requirements or securities law, are not appropriate.”