sbg regulatory
SBG Commentaries No. 11
 - June, 2011

This commentary is of interest to all registered dealers (don't be put off by the IIROC angle - the CSA may be of the same thinking).

IIROC's Draft Guidance on Outside Business Activities 


Want to be on your church's board?  Better get your firm's and regulatory approval!


On May 11, 2011 IRROC published draft Administrative Notice 11-0150 requesting comments on draft Guidance Note "Disclosure and approval of outside business activities."  This is an update to IDA Member Regulation Notice 0434 issued on November 17, 2006.


Comments are to be sent by July 11, 2001 to:


Sheery Tabesh-Ndreka
Senior Policy Counsel
Investment Industry Regulatory Organization of Canada
121 King Street West
Suite 1600
Toronto, Ontario
Canada M5HY 3T9


The proposed guidance note is largely unexceptionable except for one paragraph on page 8:


Dealer Members are reminded that any outside business activity that places an approved person in a position of influence over a client or potential client must be disclosed, whether or not it is a paid position.  Unpaid social, charitable and/or religious service is generally not considered employment or a business activity and therefore need not be disclosed on NRD.  It should be noted however, that this does not extend to situations where an individual sits on the board (or similar body) of any organization, including charities or other social or religious organizations; such situations must be disclosed. [emphasis added]


The rest of the notice outlines the approval and filing requirements (of both the firm and IIROC).


So obviously, if you want to sit on your church's board, you need to get your firm's approval and you have to tell IIROC and the CSA.  Want to sit on the Board or equivalent of your local Liberal, Conservative, NDP, Green or Communist Party? Not without getting your firm's okay and telling the regulators!


Why is all this necessary?  Well clearly, according to the draft guidance, as a Board member you have influence over a client or potential client.  You can use your position of authority over church or party members to force them to open accounts with you?  Can't you?


The regulators think you can.  We even heard of a case several years ago in which before it would grant registration to a church elder, a CSA member made the applicant promise not to solicit business from other church members.


Or maybe you would be tempted to favour your co-religionists over your other clients for, say, getting the first telephone call about some major opportunity.  So we guess you should probably send a disclosure to all those of your clients who aren't Catholic / Anglican / Presbyterian / Wiccan / Muslim / Parsi / Reformed Druid that you are a Board Member / Elder / Presbyter / Grand Wizard's Counsellor of your Meeting House / Church / Mosque / Stone Circle so that they can consider whether they would be better off transferring their accounts to registered representatives of their own faith.


So what?


We think the proposed requirement is a fundamental violation of an individual's right to privacy.  What business is it of a dealer or regulator what a registered person's religious, political, charitable, social or fraternal affiliations are?  What gives them the right to decide whether or not an individual can engage in unpaid community service?


If a registrant abuses their position with a church or charity, surely it's the church's or charity's business to deal with it, not the regulator's.  


Just what is the conflict of interest they are worried about? And why is it of such mammoth significance that it warrants trampling on registrants' human rights?


If you would like assistance writing a comment letter we would be happy to assist - this time for free!

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June 16, 2011


Comments due - CSA Request for Comments on Proposed Amendments to National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules to align requirements applicable to all marketplaces



June 20, 2011


Comments due - British Columbia and Alberta Securities Commission Request for Comments on proposed changes to TSV Rules permitting trading in securities listed on other recognized Stock Exchanges



June 29, 2011



Comments due - Alberta, British Columbia and Ontario Securities Commission and Autorité des marchés financieres requests for comment on

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