sbg regulatory
SBG Commentaries No. 10
 - May, 2011

This commentary is of interest to all IIROC Dealer Members.

New COMSET filing requirements - another IIROC rule change by edict


On May 2, 2011 IRROC announced additional filing requirements when filing COMSET reports.  According to the announcement (IIROC Administrative Notice 11-0142) these requirements can be imposed administratively because "Rule 3100(I)(B)(1) provides that IIROC may prescribe the frequency and detail of information that is reported by Dealer Members."


So what is it that IIROC wants? Here's the list:


Event Type

Documentation to be attached at the time of initial entry of the ComSet event*[1]

Customer Complaint

·         A copy of the complaint letter and any attached documents

·         For verbal complaints, a copy of the complaint recipient's notes of the conversation

·         A copy of the NCAF(s) for the relevant time period for all accounts being complained about

·         A copy of the substantive response letter to the complainant upon conclusion of the ComSet event*

Civil Claim

·         A copy of the civil claim

·         A copy of the NCAF(s) for the relevant time period for any accounts referred to in the claim

Criminal Charge

·         A copy of any public court records or documents related to the charge if available at the time of the ComSet filing

Denial of Registration or Approval

·         A copy of the notification of denial

External Disciplinary Action

·         A copy of the disciplinary action

Internal Disciplinary Action

·         A copy of the summary/report and the disciplinary letter/notification to the registrant

Internal Investigation

·         If the investigation has been concluded, a copy of the investigation report/summary

·         If the investigation is ongoing, a detailed summary of the matter giving rise to the investigation and the steps taken to date

·         A copy of the investigation report/summary upon conclusion of the ComSet event*


Now that's a whole mess of new filing to be imposed by administrative fiat.  Our very first commentary complained about a penchant we had noticed at IIROC for imposing new requirements without going through the messy process of making rule changes.


This looks to us like another example.


Rule 3100(I)(B)(1) reads:


Each Dealer Member shall report to its designated SRO, in such detail and frequency as prescribed by the SRO...[a whole list of things including those noted above.][2]


It seems to us that a requirement to report something is an entirely different thing from having to file copies of documents, even if the rule gives IIROC the authority to dictate reporting detail.


We get some support for this concept by looking at Rule 3100(1)(B)(2):


Documentation associated with each item required to be reported under Part I Section B shall be maintained and available to the designated SRO, upon request, for a minimum of 2 years from the resolution of the matter.


Clearly those who wrote the rule (and one of us was a contributor to that effort) had no thought of making Members file everything to do with the matters that have to be reported. In our view, this reference to maintenance of associated documents clearly undercuts IIROC Staff's position that the new requirements are merely a change in reporting "detail."


And why do they want all this material.  Well, according to the notice:


The additional data obtained through the new reporting requirements will permit IIROC to conduct more timely and efficient initial reviews of ComSet filings. Furthermore, in many cases, we anticipate that the initial provision of this information will result in fewer subsequent requests for information.


So making Dealer Members file most everything at the get-go, will relieve them of those pesky but selective requests for documents after the filing.  How thoughtful!


So what?


There are any number of minor matters that have to be reported on ComSet but are quickly resolved or don't on the surface raise anything that should be of particular interest to IIROC.  It strikes us that these new requirements impose a huge filing burden on IIROC Dealer Members, and concomitant processing and filing costs on IIROC itself, without much in the way of obvious benefit to anyone.


This is the kind of change that should go through the rule-making process, providing an opportunity to comment and at least some kind of stab at a cost/benefit discussion.



[1]The asterisk causes us a bit of confusion. It refers to the following: "*Note: These documents are to be attached upon conclusion of the ComSet event."  We can see the application to the substantive response to a complainant and an investigation report because they don't exist at the time of the initial report.  But its inclusion in the heading to the second column seems to contradict the meaning of the heading. 


[2]The references to a "designated SRO" are of course out of date because IIROC is the only designated SRO left standing, but these will presumably be changed in the rule rewrite project.


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