IIROC reveals compliance priorities for the year aheadBy Andrew Rickard | January 16 2017 09:45AM
The Investment Industry Regulatory Organization of Canada (IIROC) will be keeping an eye on product suitability, conflicts of interest, robo-advice, and seniors issues next year.
Last week, IIROC released a report outlining its compliance priorities for 2017. It reveals that the regulator's Business Conduct Compliance (BCC) staff plan to make certain that advisors have conducted a thorough assessment of their clients’ risk tolerance and are recommending appropriate products.
"Precise, accurate and consistent"
IIROC says the know-your-client (KYC) information advisors collect needs to be "precise, accurate and consistent", and compliance staff will be checking both individual trades and overall accounts to make sure that investment portfolios are suitable. BCC staff will also be verifying that advisors have addressed material conflicts of interest (whether they are existing or potential) in a way that "is consistent with the best interest of the client".
Robo-advice will also come under the regulator's magnifying glass. IIROC notes that more firms have started offering online advice, and warns that the automated nature of these services poses number of regulatory problems. In particular, the BCC wants to see "clear disclosure about the limited products and services being offered", and ensure that the KYC information that has been collected online includes risk tolerance information and is appropriate relative to the complexity of the product being sold online.
Seniors and financial advice
The number of seniors who receive financial advice and other investment-related services from IIROC firms has increased significantly in recent years, and the regulator says a significant portion of the complaints it receives comes from older people. "When testing for account suitability, BCC examiners will continue to select a percentage of seniors’ accounts," reads the report. "Our reviews will focus on their investment objectives and time horizon, and the adequacy of supervisory processes to ensure their investments are suitable."
These are just some of the highlights from the guidance notice. The complete report may be downloaded from the IIROC web site.