IIROC releases final guidance on underwriting due diligence

December 19, 2014

On December 18, the Investment Industry Regulatory Organization of Canada released final guidance in respect of underwriting due diligence.

Ultimately, the document sets out a number of key principles respecting underwriting due diligence, as well as associated guidance respecting each principle, including in regards to: (i) policies and procedures for underwriting due diligence; (ii) due diligence plans; (iii) due diligence Q&A sessions; (iv) business due diligence; (v) legal due diligence; (vi) reliance on experts and other third parties; (vii) reliance on lead underwriter; (viii) due diligence record-keeping; and (ix) the role of supervision and compliance.

As we stated in March when a draft version of the guidance was released, while IIROC's intention was to codify common practices and suggestions, the proposed guidance could have represented a departure from what some dealers consider to be the current market standard. In response to this concern, IIROC specifically states that only appropriate matters are identified as being mandatory, and that many of the statements concerning dealers' policies and procedures provide "ample room" for dealers to reflect the contexts of their businesses.

As previously discussed, proposed amendments were published in March of this year, and the final version published yesterday takes into account stakeholder comments submitted to IIROC. The guidance takes effect immediately.

For more information, see IIROC Notice 14-0299.

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