CanadaCIRO Rule 3100, Part B, conflicts of interest
CIRO IDPC Rule 3100, ss. 3110-3114
In force since .
An AI sector rules rule binding private bodies.
- Enforcement body
- Canadian Investment Regulatory Organization (CIRO)
- Instrument type
- a regulation made under an act
- Obligation class
- Governance, Disclosure
- Audit expectation
- continuous
- Who audits it
- Self
As of .
What it requires
- It reaches you if you are a Dealer Member of the Canadian Investment Regulatory Organization (CIRO), which Canada's provincial and territorial securities regulators recognize as a self-regulatory organization, or an Approved Person of one, because a hearing panel that finds a Dealer Member or an Approved Person has contravened a CIRO requirement may impose sanctions on it (Rules 8209 and 8210), and the Rules exclude a Mutual Fund Dealer Member from the term Dealer Member: take reasonable steps to identify existing material conflicts of interest, and material conflicts of interest that are reasonably foreseeable, between you and the client and between each Approved Person acting on your behalf and the client (Rule 3110(1)).
- Address all material conflicts of interest between you, including each Approved Person acting on your behalf, and the client in the best interest of the client, and avoid a material conflict that is not, or cannot be, otherwise addressed in the best interest of the client (Rule 3112(1) and (2)).
- Adequately supervise how your Approved Persons address all material conflicts of interest between the client and the Approved Person (Rule 3112(3)).
- Disclose in writing all material conflicts of interest you identify to the client whose interests are affected if a reasonable client would expect to be informed, describing the nature and extent of the conflict, its potential impact on and risk to the client and how it has been or will be addressed, in a manner that is prominent, specific and written in plain language, before opening an account if the conflict is already identified and otherwise in a timely manner; disclosure alone does not satisfy the duty to address the conflict (Rule 3113).
- Have policies and procedures that specifically address identifying, disclosing and avoiding or otherwise addressing material conflict of interest situations (Rule 3114(1)).
- As an Approved Person, take reasonable steps to identify material conflicts of interest between you and the client and report any you identify promptly to the Dealer Member, address them in the best interest of the client, avoid one that cannot otherwise be so addressed, and do not trade or advise in connection with a material conflict unless it has been addressed in the best interest of the client and the Dealer Member has consented (Rules 3110(2) and (3) and 3111).
If you get it wrong
Penalty structure
CIRO states that a Dealer Member found to have violated CIRO rules may be fined up to a maximum of $5 million per contravention or an amount equal to three times the profit made, or loss avoided.
- Rule
- Per violation only
- As of
- Currency
- CAD
- Per violation unit
- Violation
- Per violation amount
- 5,000,000
What this law does
CIRO Rule 3110 requires a Dealer Member to take reasonable steps to identify existing material conflicts of interest, and material conflicts of interest that are reasonably foreseeable, between the Dealer Member and the client and between each Approved Person acting on the Dealer Member's behalf and the client.
An Approved Person must take reasonable steps to identify existing and reasonably foreseeable material conflicts of interest between the Approved Person and the client and must promptly report any it identifies to the Dealer Member.
A Dealer Member must address all material conflicts of interest between itself, including each Approved Person acting on its behalf, and the client in the best interest of the client, and must avoid a material conflict that is not, or cannot be, otherwise addressed in the best interest of the client. A Dealer Member must adequately supervise how all material conflicts of interest between the client and the Approved Person are addressed by its Approved Persons.
An Approved Person must address all material conflicts of interest between the client and the Approved Person in the best interest of the client, must avoid a conflict that cannot otherwise be so addressed, and must not engage in any trading or advising activity in connection with a material conflict unless it has been addressed in the best interest of the client and the Dealer Member has given its consent to proceed.
A Dealer Member must disclose in writing all material conflicts of interest it identifies to the client whose interests are affected if a reasonable client would expect to be informed of those conflicts of interest.
The disclosure must describe the nature and extent of the conflict of interest, the potential impact on and risk that it could pose to the client and how it has been or will be addressed, must be prominent, specific and written in plain language, and must be made before the account is opened if the conflict has been identified at that time and otherwise in a timely manner.
A Dealer Member and an Approved Person do not satisfy the duty to address a material conflict of interest in the client's best interest solely by providing disclosure to the client. A Dealer Member's policies and procedures must specifically address identifying, disclosing and avoiding or otherwise addressing material conflict of interest situations.
A Dealer Member must comply with all relevant Corporation requirements, securities laws and applicable laws that are applicable to its activities, under section 1406 of the Investment Dealer and Partially Consolidated Rules. Under the Investment Dealer and Partially Consolidated Rules the term Dealer Member has the meaning given in the CIRO General By-law and excludes a Mutual Fund Dealer Member.
CIRO states that a Dealer Member found to have violated CIRO rules may be fined up to a maximum of $5 million per contravention or an amount equal to three times the profit made, or loss avoided. The Investment Dealer and Partially Consolidated Rules replaced the IIROC Rules and became effective on . The Client Focused Reforms' conflicts of interest requirements came into force on .
When LexLint raises it
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