IIROC publishes draft requirements for distribution of non-arm's length investment products
On February 5, the Investment Industry Regulatory Organization of Canada (IIROC) published for comment its draft rules notice, "Requirements and Best Practices for distribution of non-arm's length investment products", which addresses the regulatory concerns raised by the distribution by a Dealer Member to its clients of investment products issued by the Member itself, an issuer, or a selling securityholder with which a Member does not deal at arm's length or is otherwise connected. The draft notice sets out IIROC staff's expectations regarding distributions by Dealer Members of non-arms length investment products and provides guidance to assist Dealer Members in meeting their regulatory obligations to their clients. The draft notice also includes a new requirement that Dealer Members must notify IIROC in advance of the initial distribution of non-arms length investment products. In publishing the draft requirements, IIROC cited concerns regarding potential conflicts of interest, product due diligence and client suitability.
