IIROC guidance outlines roles for PMs, dealers in service arrangements

New guidance by the Investment Industry Regulatory Organization of Canada (IIROC) aims to help clarify the regulator’s expectations for dealers that have certain types of service arrangements with registered portfolio managers.

An IIROC notice published Thursday provides guidance to dealers on best practices when entering into Portfolio Manager – Dealer Member Service Arrangements (PMDSA) with registered portfolio managers. In such arrangements, the portfolio manager (PM) has discretionary trading authority over client accounts that are held at the dealer.

“The investor is considered to be a client of both the PM and the dealer but, each has different roles and responsibilities, and different regulatory obligations, to the client,” IIROC says in the notice.

Among other things, the guidance covers account opening procedures, disclosure and client reporting (including responsibilities for trade confirmations, account statements and performance and cost reporting).

It also sets out expectations for dealers to have policies to deal with client complaints, resolve any account discrepancies, co-operate with regulatory investigations, and handle the termination of the relationship between a client and the portfolio manager.

The Canadian Securities Administrators, which has direct oversight of portfolio managers, has issued its own guidance that primarily focuses on the portfolio managers’ obligations in these sorts of arrangements.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.