IIROC rule amendment to permit delivery of unaudited summary financial statements upon client request

11 novembre 2015

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Effective November 2, 2015, the Investment Industry Regulatory Organization of Canada (IIROC) Dealer Member Rule 1400 will be amended to permit a dealer member to provide a client with a summary statement of financial position under Dealer Member Rule 1400 on an unaudited basis.  The new standard summary statement of financial position will be generated by the dealer member using the Securities Industry Regulatory Financial Filings system and would be certified by the Chief Financial Officer of the dealer member.

The amendments are intended to address the concerns of independent auditors that they are no longer able to provide the required auditor’s report to clients of a dealer member without expanding the scope of their audit work beyond an IIROC Form 1 audit.

The difficulty stems from IIROC’s adoption of International Financial Reporting Standards for IIROC Form 1 (Financial Report) in 2011.  In order for independent auditors to remain compliant with Canadian generally accepted accounting standards and to continue to meet the requirements of Dealer Member Rule 1400, independent auditors would have to expand their audit beyond a IIROC Form 1 audit.  This is because an IIROC Form 1 audit is a special purpose audit which is intended for a limited audience comprised of the dealer member, IIROC and the Canadian Investor Protection Fund.  Contrary to this, Dealer Member Rule 1400 required that an independent auditor’s report accompany a statement of financial condition requested by a client.  That statement of financial condition would be derived from IIROC Form 1.  In order for an independent auditor’s report to be included in the statement of financial condition delivered to a client, significant costs would be required for dealer members and, in IIROC’s opinion, the benefits would be marginal – hence the amendment. 

For further information, please see IIROC Rules Notice 15-0244 Disclosure to clients of Dealer Members’ financial position.

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