IIROC continues to obtain expanded national enforcement powers

  • Geoffrey Grove
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Oct 26, 2018

On October 12, 2018, the Government of Nova Scotia passed legislation giving the Investment Industry Regulatory Organization of Canada (IIROC) the ability to exercise its “full enforcement toolkit” in that province, in aid of IIROC's mandate to protect investors and support healthy capital markets in Canada. Among the new powers that IIROC now enjoys in Nova Scotia are expanded abilities to conduct investigations and protection from malicious lawsuits while IIROC is acting in good faith to protect investors.

IIROC

IIROC is the national self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.

The various provincial securities regulators in Canada have designated IIROC as a “self regulatory organization” (SRO) under respective provincial securities legislation. Accordingly, IIROC is recognized as a Canada-wide organization with jurisdiction in the Canadian investment industry. As a result of IIROC's SRO designations, IIROC carries out regulatory responsibilities given to it under Recognition Orders from the Nova Scotia Securities Commission and other provincial and territorial securities commissions across the country. The SROs currently recognized by Canadian provincial securities regulators are IIROC and the Mutual Fund Dealers Association of Canada (known as the MFDA).

IIROC's expanding powers

Since IIROC's formation in 2008, it has pressed to obtain enforcement authority in Canadian provinces. With the passage of Bill 67 on October 12, Nova Scotia is the third province to give IIROC the “full enforcement toolkit”, joining Alberta and Quebec. IIROC describes the “full” toolkit as follows:

  • the ability to enforce fine collection against individuals that engage in misconduct
  • authority to collect and present evidence during investigations and at disciplinary hearings
  • protection from malicious lawsuits while acting in good faith to carry out its public interest mandate to protect investors.

Manitoba and Prince Edward Island have given IIROC “partial enforcement toolkits”, which generally include two of the three aspects of the full enforcement toolkit described above. In addition, IIROC has obtained the ability to collect fines through the courts in Alberta, British Columbia, Ontario and Quebec.

IIROC has stated that it continues to pursue additional legal authority to strengthen the effectiveness of its enforcement actions. For example, IIROC only recently obtained the ability to collect fines in Ontario (May 2017) and B.C. (May 2018). Whether all provinces will ultimately give IIROC the “full enforcement toolkit” remains to be seen. In the meantime, industry participants subject to IIROC’s jurisdiction should be aware of IIROC’s powers within the various provinces and continue to monitor developments over the coming months and years.