IIROC drops rule proposals

150 150 Enoch Wealth Management

IIROC drops rule proposals

January 18th 2021

IIROC drops rule proposals for identifying non-client accounts
Reforms developed for industry were rejected in a public consultation

Citing pushback from the industry, the Investment Industry Regulatory Organization of Canada (IIROC) has scrapped planned rule changes that sought to improve the process of identifying “pro” accounts.

In a notice, IIROC said that it has abandoned proposed rule changes and new guidance that were intended to clarify the self-regulatory organization’s requirements for pro accounts, and to harmonize the dealer rules and trading rules.

The proposals, which were published in September 2019, were developed with the input of a special industry working group in an effort to address industry confusion over how to mark orders or accounts as “non-client.”

“However, public commenters expressed concern with proceeding with the proposed amendments and proposed guidance due to their potential industry impact,” IIROC said in its notice.

As a result, it decided to withdraw the proposals, it said.

IIROC said it will consider issuing new guidance on the definition of “non-client orders” and “non-client accounts.”

Changes since 2019: The National Amendments are substantially similar to the proposed amendments published by the CSA for comment in March 2019 (2019 Proposal). But there have been a few changes. For example, Form 45-106F18 Supplemental Disclosure for Syndicated Mortgages will require disclosure of the potential subordination of the syndicated mortgage, clarify the calculation of the loan-to-value ratio, and include additional examples of risk factors.

Some jurisdictions have proposed further changes to their exemptions:

• Qualified syndicated mortgages: Ontario and New Brunswick have published for comment prospectus and registration exemptions for “qualified syndicated mortgages” (QSMs), and we expect Nova Scotia to introduce a similar pair of exemptions. Alberta and Québec have proposed a prospectus-only exemption for trades in QSMs.

• Distributions of non-qualified syndicated mortgage investments (NQSMIs) to permitted investors: Ontario and New Brunswick also have proposed prospectus and registration exemptions for distributions of NQSMIs to permitted clients (i.e. institutional and high net worth investors). Alberta has proposed a prospectus-only exemption for trades in NQSMIs to permitted clients, while Québec is asking for feedback on whether such an exemption should be introduced.

• Reports of exempt distribution: Ontario and New Brunswick will not require a Form 45-106F1 Report of Exemption Distribution to be filed for distributions of QSMs under their new prospectus exemptions or for distributions of NQSMIs sold to permitted clients.

Who will regulate what in Ontario beginning in March 2021? FSRA currently regulates all syndicated mortgage investments in Ontario. When the new regime comes into effect, FSRA will continue to supervise transactions involving qualified, syndicated mortgage investments and the mortgage brokers and administrators involved in such transactions. Oversight of NQSMIs will be split between FSRA and the OSC, depending on the status of the investor/lender and the type of transaction. In particular, FSRA will supervise:

• NQSMI transactions with permitted clients;

• NQSMI transactions with permitted and non-permitted clients before March 1, 2021 (Legacy NQSMIs); and

• Administrators of NQSMIs.

Mortgage brokerages that deal in mortgages and syndicated mortgages only with permitted clients will not have to register with the OSC and the distributions of these products to permitted clients will be exempt from the prospectus requirement. There will be dual oversight however, in some circumstances. For example, FSRA will have oversight over mortgage brokers dealing in NQSMIs when they act on behalf of the borrower who is not a permitted client, with the OSC having oversight over the trades with respect to that investor/lender.

The proposed FSRA Guidance describes FSRA’s forward-looking, risk-based approach to supervision of the firms and transactions over which it will have authority and outlines the data it plans to collect from firms to inform its risk assessments.

IIROC drops rule proposals

January 18th 2021

IIROC drops rule proposals for identifying non-client accounts
Reforms developed for industry were rejected in a public consultation

Citing pushback from the industry, the Investment Industry Regulatory Organization of Canada (IIROC) has scrapped planned rule changes that sought to improve the process of identifying “pro” accounts.

In a notice, IIROC said that it has abandoned proposed rule changes and new guidance that were intended to clarify the self-regulatory organization’s requirements for pro accounts, and to harmonize the dealer rules and trading rules.

The proposals, which were published in September 2019, were developed with the input of a special industry working group in an effort to address industry confusion over how to mark orders or accounts as “non-client.”

“However, public commenters expressed concern with proceeding with the proposed amendments and proposed guidance due to their potential industry impact,” IIROC said in its notice.

As a result, it decided to withdraw the proposals, it said.

IIROC said it will consider issuing new guidance on the definition of “non-client orders” and “non-client accounts.”

Changes since 2019: The National Amendments are substantially similar to the proposed amendments published by the CSA for comment in March 2019 (2019 Proposal). But there have been a few changes. For example, Form 45-106F18 Supplemental Disclosure for Syndicated Mortgages will require disclosure of the potential subordination of the syndicated mortgage, clarify the calculation of the loan-to-value ratio, and include additional examples of risk factors.

Some jurisdictions have proposed further changes to their exemptions:

• Qualified syndicated mortgages: Ontario and New Brunswick have published for comment prospectus and registration exemptions for “qualified syndicated mortgages” (QSMs), and we expect Nova Scotia to introduce a similar pair of exemptions. Alberta and Québec have proposed a prospectus-only exemption for trades in QSMs.

• Distributions of non-qualified syndicated mortgage investments (NQSMIs) to permitted investors: Ontario and New Brunswick also have proposed prospectus and registration exemptions for distributions of NQSMIs to permitted clients (i.e. institutional and high net worth investors). Alberta has proposed a prospectus-only exemption for trades in NQSMIs to permitted clients, while Québec is asking for feedback on whether such an exemption should be introduced.

• Reports of exempt distribution: Ontario and New Brunswick will not require a Form 45-106F1 Report of Exemption Distribution to be filed for distributions of QSMs under their new prospectus exemptions or for distributions of NQSMIs sold to permitted clients.

Who will regulate what in Ontario beginning in March 2021? FSRA currently regulates all syndicated mortgage investments in Ontario. When the new regime comes into effect, FSRA will continue to supervise transactions involving qualified, syndicated mortgage investments and the mortgage brokers and administrators involved in such transactions. Oversight of NQSMIs will be split between FSRA and the OSC, depending on the status of the investor/lender and the type of transaction. In particular, FSRA will supervise:

• NQSMI transactions with permitted clients;

• NQSMI transactions with permitted and non-permitted clients before March 1, 2021 (Legacy NQSMIs); and

• Administrators of NQSMIs.

Mortgage brokerages that deal in mortgages and syndicated mortgages only with permitted clients will not have to register with the OSC and the distributions of these products to permitted clients will be exempt from the prospectus requirement. There will be dual oversight however, in some circumstances. For example, FSRA will have oversight over mortgage brokers dealing in NQSMIs when they act on behalf of the borrower who is not a permitted client, with the OSC having oversight over the trades with respect to that investor/lender.

The proposed FSRA Guidance describes FSRA’s forward-looking, risk-based approach to supervision of the firms and transactions over which it will have authority and outlines the data it plans to collect from firms to inform its risk assessments.

IIROC drops rule proposals

January 18th 2021

IIROC drops rule proposals for identifying non-client accounts
Reforms developed for industry were rejected in a public consultation

Citing pushback from the industry, the Investment Industry Regulatory Organization of Canada (IIROC) has scrapped planned rule changes that sought to improve the process of identifying “pro” accounts.

In a notice, IIROC said that it has abandoned proposed rule changes and new guidance that were intended to clarify the self-regulatory organization’s requirements for pro accounts, and to harmonize the dealer rules and trading rules.

The proposals, which were published in September 2019, were developed with the input of a special industry working group in an effort to address industry confusion over how to mark orders or accounts as “non-client.”

“However, public commenters expressed concern with proceeding with the proposed amendments and proposed guidance due to their potential industry impact,” IIROC said in its notice.

As a result, it decided to withdraw the proposals, it said.

IIROC said it will consider issuing new guidance on the definition of “non-client orders” and “non-client accounts.”

Changes since 2019: The National Amendments are substantially similar to the proposed amendments published by the CSA for comment in March 2019 (2019 Proposal). But there have been a few changes. For example, Form 45-106F18 Supplemental Disclosure for Syndicated Mortgages will require disclosure of the potential subordination of the syndicated mortgage, clarify the calculation of the loan-to-value ratio, and include additional examples of risk factors.

Some jurisdictions have proposed further changes to their exemptions:

• Qualified syndicated mortgages: Ontario and New Brunswick have published for comment prospectus and registration exemptions for “qualified syndicated mortgages” (QSMs), and we expect Nova Scotia to introduce a similar pair of exemptions. Alberta and Québec have proposed a prospectus-only exemption for trades in QSMs.

• Distributions of non-qualified syndicated mortgage investments (NQSMIs) to permitted investors: Ontario and New Brunswick also have proposed prospectus and registration exemptions for distributions of NQSMIs to permitted clients (i.e. institutional and high net worth investors). Alberta has proposed a prospectus-only exemption for trades in NQSMIs to permitted clients, while Québec is asking for feedback on whether such an exemption should be introduced.

• Reports of exempt distribution: Ontario and New Brunswick will not require a Form 45-106F1 Report of Exemption Distribution to be filed for distributions of QSMs under their new prospectus exemptions or for distributions of NQSMIs sold to permitted clients.

Who will regulate what in Ontario beginning in March 2021? FSRA currently regulates all syndicated mortgage investments in Ontario. When the new regime comes into effect, FSRA will continue to supervise transactions involving qualified, syndicated mortgage investments and the mortgage brokers and administrators involved in such transactions. Oversight of NQSMIs will be split between FSRA and the OSC, depending on the status of the investor/lender and the type of transaction. In particular, FSRA will supervise:

• NQSMI transactions with permitted clients;

• NQSMI transactions with permitted and non-permitted clients before March 1, 2021 (Legacy NQSMIs); and

• Administrators of NQSMIs.

Mortgage brokerages that deal in mortgages and syndicated mortgages only with permitted clients will not have to register with the OSC and the distributions of these products to permitted clients will be exempt from the prospectus requirement. There will be dual oversight however, in some circumstances. For example, FSRA will have oversight over mortgage brokers dealing in NQSMIs when they act on behalf of the borrower who is not a permitted client, with the OSC having oversight over the trades with respect to that investor/lender.

The proposed FSRA Guidance describes FSRA’s forward-looking, risk-based approach to supervision of the firms and transactions over which it will have authority and outlines the data it plans to collect from firms to inform its risk assessments.