IIROC Issues Guidance on Outsourcing Arrangements

TORONTO, Jan. 13, 2014 /CNW/ - The Investment Industry Regulatory Organization of Canada (IIROC) today issued two final Guidance Notes, one to clarify the requirements of Member-Dealer firms who engage in outsourcing arrangements, and another with specific focus on one form of outsourcing--clearing arrangements.

Guidance on outsourcing helps IIROC Member Dealers to understand their obligations so that they may manage the associated risks, and also ensures consistency among firms and with guidelines from other regulators.

In addition to summarizing requirements for entering into and maintaining outsourcing arrangements, the Guidance identifies the business activities that may be outsourced and the functions that may not be outsourced, and sets IIROC expectations for appropriate due diligence procedures.

Interest by firms in contracting business functions, activities and processes to third-party service providers is growing amid increasing competitive pressures. "We want to ensure we strike the right balance between requiring the appropriate protections while reflecting the business realities that prompt firms to outsource functions," said Rosemary Chan, IIROC Senior Vice-President, Member Compliance, General Counsel and Corporate Secretary.

Clearing arrangements, in which back-office services are outsourced from dealers to other dealers, primarily for the purpose of clearing and settling trades, are specifically addressed by IIROC in a separate Guidance Note also issued today.

Draft Guidance on clearing arrangements was issued for public comment in October 2012 and the final notice takes into account responses from stakeholders. The Final Guidance defines a clearing arrangement, explains the services provided by a clearing dealer under a clearing arrangement, and outlines the specific, practical issues and outsourcing due diligence obligations that should be addressed when considering whether to enter into a clearing arrangement.

IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc., IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

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.

SOURCE: Investment Industry Regulatory Organization of Canada (IIROC) - General News

Karen Archer
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Lucy Becker
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