Strategizing for 2024’s regulatory changes in the investment industry
As we move further into 2024, we’ll be keeping a close eye on the shifting regulatory landscape while sharing timely updates and “food for thought”—so you can maintain your focus on bigger things.
Read on as we share some strategies for ensuring you’re well positioned to navigate Canada’s ever evolving and complex investment and regulatory regime in 2024.
CIRO’s new sanctions guidance takes effect on February 1
With the recent release of harmonized guidance on enforcement sanctions and other disciplinary policies1, the Canadian Investment Regulatory Organization (CIRO) has taken another step toward integrating its investment dealer and mutual fund dealer arms into a single industry self-regulatory organization (SRO).
CIRO’s new sanctions guidance, which takes effect on February 1, 2024, will replace the previous guidance that was in place under its predecessors, the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC).
The SRO said the single set of guidance is designed to “reinforce consistency, fairness, and transparency in the sanctioning process.”
The guidance covers basic principles, including the expectation that sanctions be preventative, not punitive; that violators shouldn’t be able to benefit financially from their misconduct; and that repeat offenders should be treated more severely.
It also sets out a list of 20 factors that will be considered in delivering sanctions, such as the extent of harm the misconduct caused, whether a pattern of misbehavior existed, whether the victims were vulnerable, and whether there have been efforts to repay them, as well as numerous other considerations.
The current standard securities settlement cycle in Canada and the United States is two days after the date of the trade. That’s all going to change in late May 2024.
On December 1, 2021, the investment industry in the United States published a report targeting the first half of 2024 to shorten the United States securities settlement cycle from two days after the date of the trade to one day after the date of the trade.
The rationale was that a move to a T+1 settlement cycle would increase the overall efficiency of the securities markets and reduce credit, market, and liquidity risks associated with securities transactions.
On February 15, 2023, the U.S. Securities and Exchange Commission (SEC) adopted rule changes to shorten the standard settlement cycle to T+1. The industry must implement the move to T+1 by May 28, 2024, to comply with the SEC rules.
It’s important that Canada’s settlement cycle continues to be harmonized with the U.S. settlement cycle because of the close connections between the two countries’ capital markets.
NOTE: Following a public comment period on the proposed changes, the Canadian Securities Administrators (CSA) finalized changes to their trading rules to accommodate the planned shift to T+1 (trade day plus one) settlement for the Canadian equity markets and long-term debt trades in the spring2.
The CSA pushed back the institutional trade-matching deadline—which was originally proposed for 9 p.m. (ET) on the day that a trade takes place—to 3:59 a.m. (ET) on the day following the trade. The revised deadline reflects feedback received from the industry that it would be sensible to provide the longest possible time frame to accommodate settlement processing cycles.
The rule changes will take effect on May 27, 2024, when the move to T+1 takes place in Canada.
Due to the number and magnitude of changes that will be required to achieve a T+1 settlement cycle, it’s vital that firms conduct comprehensive and well-coordinated industry testing to ensure readiness and a successful implementation.
Data portability changes to Law 25 coming in September
Law 253 is another regulatory change clients should keep on their radar. It’s a data privacy law specific to Quebec, which applies to Quebec-based businesses and any external businesses processing the personal information of any Quebec residents.
Law 25 was passed by the Quebec government in September 2021. It follows a phased approach over three years, starting in 2022. Given this phased approach, businesses have most likely already implemented many facets of the Law over the last couple of years. Note, however, that a specific requirement of the Law will come into effect on September 22, 2024. This final phase of the Law is around data portability. As of that date, upon their request, individuals will have the right to receive a digital copy of all personal information collected from them by the organization.
We hope this regulatory update helps you steer your firm and customers towards a compliant and prosperous 2024.
At FCC, we want to “mind your business” together. Our commitment to partnering with our clients means helping you work more efficiently and effectively—to free up your time for what matters most. Leveraging the power of uniFide®, our leading-edge digital business platform, while keeping a close eye on the shifting regulatory landscape and sharing timely updates and proactive advice, are just a few of the ways we deliver peace of mind. For less do, and more u!
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