Regulators give small, specialized investment firms greater flexibility – The Globe and Mail

Lori Stein

Jul 29, 2020

A recent article in The Globe and Mail looks at new guidance issued by Canada’s securities regulators that will allow investment firms to hire an external chief compliance officer (CCO). Author Brenda Bouw reports that the Canadian Securities Administrators (CSA), the umbrella organization for all of the provincial and territorial securities commissions, recently issued a staff notice that it says will allow firms to adopt “more flexible” CCO arrangements “that better align with their operational needs and business models.” The CSA provided three models to “help small and specialized businesses as well as firms with multiple lines of business,” including a shared CCO model (one person can work for more than one firm), a multiple CCOs model (a firm can have more than one CCO) and a specialized CCO model.

“It could be a really significant step toward providing more flexibility in our regulatory system,” says Lori Stein, a partner in Osler’s Investment Funds and Asset Management Group. “It shows that regulators want to be flexible and accommodate different business models and innovation.”

In the distant past, firms were allowed to outsource the CCO role but, in the eyes of regulators, some didn’t have enough experience or connection to the firm to manage the risks, Lori tells The Globe and Mail. The CSA then made it mandatory for the firms to make the CCO role an internal position, which was costly for many smaller firms that didn’t need a full-time person in that role. It was also hard to find candidates who had the specific qualifications required. “It was a real challenge … and a barrier to entry [for smaller firms],” Lori states.

Regulators have granted exemptions to some firms over the years, on a case-by-case basis, for CCO candidates that demonstrated “fitness for registration” but didn’t meet certain proficiency requirements, which generally includes at least three years of relevant compliance experience and completing specific exams, Lori explains.

For more of Lori’s insight, read Brenda Bouw’s full article, “Regulators give small, specialized investment firms greater flexibility,” in The Globe and Mail.