CanadaCIRO Rule 3900, supervision
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
- Audit expectation
- periodic
- Who audits it
- Self
- Where the report goes
- Kept
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: establish policies and procedures for a supervisory system to supervise the activities of all your employees and Approved Persons that provides reasonable assurance they comply with Corporation requirements and securities laws, put them in writing, and amend them within a reasonable time after changes in Corporation requirements or securities laws (Rule 3904(1) and (2)).
- Assign sufficient personnel and commit adequate resources to fully and properly apply and enforce your policies and procedures, take reasonable steps to ensure your Supervisors and Executives are fully proficient and understand the products and services of the people they supervise, and have procedures in place that ensure Supervisors are properly performing their supervisory functions (Rule 3905(1), (5) and (6)).
- If a Supervisor delegates supervisory tasks and procedures, keep the Supervisor responsible for their performance, use a delegate qualified by registration, training or experience, inform the delegate in writing of the tasks, ensure the delegate adequately performs them, establish reporting mechanisms, and keep a record of the terms of the delegation and the follow up (Rule 3907).
- Maintain adequate records of supervisory activity, including compliance issues identified and their resolution, and keep records of completed supervisory reviews, with details of inquiries and their resolution, for the period set out in section 3803 (Rules 3908(3) and (5) and 3927(2)).
- Have your Chief Compliance Officer provide a written report to your board of directors at least annually for the purpose of assessing compliance with Corporation requirements and securities laws, and have the board review the report and its recommendations, ensure that action is taken on compliance deficiencies, and keep records of the actions (Rule 3915).
- Effectively supervise account activity, include controls for accessing and amending client records in your policies and procedures, and review account activity as required by Corporation requirements (Rules 3925(1), 3926(5) and 3927(1)).
- If you have retail client accounts, have policies and procedures that specifically address daily and monthly supervision of trading activity in them and the detection of unsuitable trading, undue concentration and excessive trading, among the other matters in the rule, and supervise each Registered Representative, Investment Representative, Portfolio Manager and Associate Portfolio Manager to confirm they comply with the suitability determination under Rule 3400 (Rules 3945 and 3948).
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
The Dealer Member's board of directors is responsible for ensuring that an appropriate supervision system is in place. A Dealer Member's policies and procedures must establish a supervisory system to supervise the activities of all its employees and Approved Persons that provides reasonable assurance they comply with Corporation requirements and securities laws. A Dealer Member must ensure all supervisory policies and procedures are in writing.
A Dealer Member must amend its policies and procedures relating to supervision within a reasonable time after changes in Corporation requirements or securities laws are made. A Dealer Member must assign sufficient personnel and commit adequate resources necessary to fully and properly apply and enforce its policies and procedures.
A Dealer Member must take reasonable steps to ensure its Supervisors and Executives are fully proficient and understand the products that the employees and Approved Persons under their supervision trade in or advise on, and the services they provide, and must have procedures in place that ensure Supervisors are properly performing their supervisory functions.
A Supervisor may delegate supervisory tasks and procedures but not the responsibility for their performance, a delegate must be qualified by registration, training or experience, the Supervisor must inform the delegate of the delegated tasks in writing, ensure that the delegate adequately performs them and establish reporting mechanisms, and the Dealer Member must maintain a record of the terms of the delegation and of the Supervisor's follow up and review.
A Dealer Member must maintain adequate records of supervisory activity, including compliance issues identified and the resolution of such issues, and keep them for the period set out in section 3803. At least annually the Chief Compliance Officer must provide a written report to the Dealer Member's board of directors for the purpose of assessing compliance by the Dealer Member, and its employees and Approved Persons, with Corporation requirements and securities laws.
The board of directors must review the reports and recommendations to determine the appropriate action to be taken to remedy any compliance deficiencies, must ensure that such action is taken, and must maintain records of the actions and of the monitoring done to ensure that they are carried out. A Dealer Member must effectively supervise account activity and take reasonable steps to provide reasonable assurance of compliance with Corporation requirements, securities laws and applicable laws.
A Dealer Member's policies and procedures must include controls for accessing and amending client records. A Dealer Member must review account activity as required by Corporation requirements. A Dealer Member must record and keep evidence of completed supervisory reviews, including details of inquiries about issues and their resolution, for the period required in section 3803.
A Dealer Member that has retail client accounts must have policies and procedures that specifically address daily and monthly supervision of trading activity in those accounts, including the detection of unsuitable trading, undue concentration and excessive trading.
A Dealer Member must supervise each Registered Representative, Investment Representative, Portfolio Manager and Associate Portfolio Manager to confirm that they are complying with their responsibilities relating to the suitability determination to retail clients under Rule 3400.
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 .
Guidance on this law
How the bodies that enforce this law read it. Guidance binds nobody by itself, so LexLint never raises a finding from it; the duty is this law's.
- CIRO Guidance Note GN-2300-21-003, outsourcing arrangements, the Canadian Investment Regulatory Organization
When LexLint raises it
When your app profile says your app provides financial services.