Investment Industry Regulatory Organization Of Canada (IIROC) Brokers 2023
The Investment Industry Regulatory Organization of Canada (IIROC) is the country’s chief financial regulator, overseeing online brokers and local traders. This guide to the IIROC will cover its history, powers and duties as well as any criticisms.
The Investment Industry Regulatory Organization of Canada has merged with the Mutual Fund Dealers Association to become the Canadian Investment Regulatory Organization (CIRO).
This self-regulatory organization now oversees online brokers and trading platforms in Canada.
What Is The Investment Industry Regulatory Organization?
The Investment Industry Regulatory Organization serves as the principal regulator of Canadian financial markets, including online brokers. Tasked with overseeing all retail trading activity in the region, its goal is to protect Canadian citizens by setting and maintaining industry standards.
As the Canadian equivalent of the Financial Industry Regulatory Authority, or FINRA, in the United States, the IIROC has powers to respond to online scams and illegitimate trading activity. All firms that advise on or facilitate trading in securities in Canada must be members of the IIROC and follow the regulator’s rules.
The Investment Industry Regulatory Organization was founded in 2008 to consolidate The Investment Dealers Association of Canada (IDA) and Market Regulation Services (RS). It was hoped that uniting these agencies under a single entity would declutter the regulatory space and make it easier for investors to seek recourse.
Before the merger, the Investment Dealers Association (IDA) had been the principal self-regulatory organization for Canada since its formation in 1916, serving as both a regulator and an advocacy group for securities brokers.
Since the creation of the IIROC, there have been several high profile criticisms of their operations with many of their sanctions later overturned by appeal panels. Of course, this does not take away from the valuable work done by the IIROC, which has warned citizens about online scams and taken action against fraudulent firms.
The Investment Industry Regulatory Organization of Canada is a non-profit entity that operates as a self-governing body. This status grants the IIROC the powers to set universal market standards and regulations designed to protect investors. As well as regulating specific firms, the IIROC is tasked with overseeing all trading activity that takes place in Canadian marketplaces or via services available to Canadian citizens.
The organization is managed by a CEO, who runs the agency on a day-to-day basis, plus a chairperson who oversees the regulator. There is also an internal appeals division as well as periodic reviews led by the Canadian Securities Administrators (CSA).
Responsibilities Of The IIROC
The Investment Industry Regulatory Organization of Canada has several key responsibilities:
- Creating Regulations – The Universal Market Integrity Rules (UMIR) are a set of regulations designed to ensure that Canadian markets are fair and transparent. Before the introduction of the UMIR, individual exchanges and brokerages were free to set their own trading standards. Now, firms have to meet certain criteria, including providing retail trader protection and meeting financial compliance requirements.
- Monitoring Trading – The IIROC tracks market trading patterns and the activities of online brokers and other financial institutions. This is to identify and respond to suspicious or fraudulent trading activity.
- Legal Advice – The IIROC offers free legal advice to traders who believe their capital has been misallocated or that services have been mis-sold to them. Advice from legal professionals is also available on the Investment Industry Regulatory Organization of Canada’s website.
- Fund Protection – To become a member of the IIROC, brokers and exchanges have to sign up to the Canadian Investor Protection Fund (CIPF). This service protects client capital in the event that a broker goes bankrupt.
- Certifying Brokers And Advisors – The IIROC oversees approximately 175 firms and their 31,000 registered employees. The regulator also provides certification for registered financial advisors. Through their AdvisorReport service, investors can search for a firm’s qualifications and view any historical disciplinary actions.
The Investment Industry Regulatory Organization of Canada has the power to collect fines, issue suspension orders and present evidence in legal cases. Brokers can also be shut down if they are found to be engaging in fraud or market manipulation. In addition, the IIROC can intervene in the markets in real-time, issuing halts and resumptions of trading assets as well as cancelling and limiting pending trades.
There have been several public failures where IIROC rulings have been overturned, alongside a particularly serious security breach:
Personal Data Loss
With any financial regulatory body, imposing rules and regulations on a market will draw criticism from some within the industry. However, a notable criticism of the Investment Industry Regulatory Organization falls outside of this argument.
While information held by the IIROC was supposed to be heavily encrypted, unsecured personal data of thousands of brokerage clients were lost after a company laptop was misplaced. This loss represented a significant breach of security, with the missing financial data considered extremely sensitive. Following a full review by the Canadian Securities Administrators, the Investment Industry Regulatory Organization vowed to strengthen its security protocols to better protect its members’ data.
Frequent regulatory failures can make organizations appear ineffective or inept. Unfortunately, since the inception of the Investment Industry Regulatory Organization in 2008, several high profile fines and bans have been overturned on appeal. Many of the reversed sanctions have been enforced by other regulators, undermining the power and authority of the IIROC.
Final Thoughts On The IIROC
As the primary overseer of the Canadian financial markets, the IIROC has an important role. The regulator helps ensure fair trading conditions for investors while clamping down on unscrupulous brokers and scams. And crucially, membership is mandatory for all brokers looking to market their services to Canadian traders.
Despite public controversies around data loss and overturned verdicts, the Investment Industry Regulatory Organization of Canada is a reputable regulator with a strong track record. The Canadian Investor Protection Fund is also an excellent service that protects retail traders from brokers going out of business.
Before you open a trading account, check the broker holds a license with the IIROC by using the register on their official website.
Can I Trust A Marketplace Regulated By The IIROC?
As a reputable financial regulator, the Investment Industry Regulatory Organization requires that all member firms adhere to universal regulations concerning their offerings to clients. A marketplace regulated by the IIROC is likely to be legitimate and will offer comprehensive fund protection to individual investors.
Is The Investment Industry Regulatory Organization Trustworthy?
Investors and traders can place their trust in the Investment Industry Regulatory Organization. Whilst not as highly acclaimed as the UK’s FCA or the CySEC, the IIROC is still a reliable regulatory body.
How Can The Investment Industry Regulatory Organization Help Me?
The IIROC of Canada offers free legal advice to those who believe that they have been mistreated by a financial organization or advisor. The regulator also allows those within its jurisdiction to make complaints about firms, which they will investigate on your behalf.
What Are The Universal Market Integrity Rules Of The IIROC?
The Universal Market Integrity Rules (UMIR) of the IIROC are regulations that all brokers, exchanges and finical service providers in Canada must adhere to. These include minimum capital requirements for brokers and scrutiny of the trading patterns of large financial institutions.
How Many Member Firms Are There Of The IIROC?
The IIROC oversees around 175 firms and their 31,000 registered representatives. Every firm registered in Canada and its members must register with the Investment Industry Regulatory Organization.