The Investment Industry Regulatory Organization of Canada, or
IIROC, published today proposed guidance on underwriting due diligence
for public offerings. The guidance, while largely reflecting
current best practices, represents an attempt to promote
consistency and enhanced standards among investment dealers.
Underwriters have been long recognized as important gatekeepers
to capital markets. In order to responsibly sign a prospectus and
establish a statutory due diligence defence, underwriters must
conduct a reasonable investigation that provides reasonable grounds
for a belief that there has been no misrepresentation.
But what is a reasonable investigation? With this proposed
guidance, IIROC has re-confirmed its view that due diligence
practices should reflect the gatekeeper role of underwriters, which
includes protecting investors, fostering fair and efficient capital
markets and creating and maintaining confidence in capital
markets.
