IIROC releases guidance regarding non-arm's length investments

February 7, 2013

The Investment Industry Regulatory Organization of Canada yesterday released recommendations and best practices respecting the distribution by dealers to clients of non-arm's length investment products. Such products include those issued by: the dealer itself, an issuer or selling securityholder with which the dealer does not deal at arm's length, or an issuer or selling securityholder to which a dealer is otherwise connected or related.

According to IIROC, dealers are expected to follow a sequence of steps in order to satisfy their obligations in respect of the distribution of non-arm's length products, namely: (i) conducting product due diligence; (ii) completing a conflict of interest assessment; and (ii) assessing client-specific suitability. IIROC also stated that compliance reviews will focus on dealers' written policies and procedures, with the guidance providing a list of particulars expected in written policies.

IIROC originally published for comment draft expectations in February 2010. A summary of comments received, and IIROC's responses, was also published yesterday. For more information, see IIROC Notice 13-0039 and Notice 13-0040.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.