IIROC Releases Draft Guidance Regarding Outsourcing Arrangements

The Investment Industry Regulatory Organization of Canada (IIROC) earlier this week released draft guidance regarding outsourcing arrangements into which dealers commonly enter. According to IIROC, competitive pressures to contain costs have led to the outsourcing of more business functions to third-party providers through arrangements not adequately addressed by the Dealer Member Rules. IIROC specifically mentions a growing interest to outsource the daily management of books and records by self-clearing dealers as an example of a trend that may increase credit, systemic and investor risk.

As such, IIROC has ultimately categorized activities as either:

1. Core activities that may not be outsourced. This includes most central, client-facing activities such as the account opening process, the performance of suitability assessments and the handling of client complaints.