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The Canadian Investment Regulatory Organization (CIRO) recently released proposals to modernize the requirements for account transfers and bulk account movements. The amendments are intended to address identified client service disruptions that may occur when accounts are transferred to a new CIRO registrant and there is a delay in moving some of the client's account positions. A number of reasons are suggested for these type of delays, including outdated transfer processes and inconsistent account transfer regulatory requirements.
The rule amendments are intended to:
- Permit the dealer use of additional automated account transfer facilities;
- Require dealer firms to electronically communicate with each other if a recognized account transfer facility is available;
- Clarify the transfer process steps so that clients are consulted earlier on; and
- Specify the time to complete individual account transfer steps (such as providing the receiving dealer with an account cash/positions list and informing the client of any impediments, as well as the overall time to complete an account transfer).
More specifically, the amendments would require that the receiving dealer inform the client of all transfer impediments at the delivering dealer and receiving dealer, the client's options for resolving these impediments, and the impacts of each impediment resolution option within 2 clearing days after receipt of the account's cash balances and positions list. Client instructions would need to be obtained on the options in advance of the client being asked to make a final decision on how to proceed. CIRO has proposed a standard settlement period of 10 clearing days for account transfers (including for transfers with impediments). CIRO's stated intention is to further shorten this settlement period in the future as technology solutions are introduced and new automated account transfer facilities become available.
In addition, the proposed rule amendments include a new principles-based requirement for firms involved in a bulk account transfer to "make reasonable effect to ensure prompt movement of accounts."
There is a separate initiative underway to look at technological solutions to replace manual processes and which are described in a CIRO white paper entitled "CIRO White Paper: Enhancing Timely and Efficient Account Transfers in Canada: Phase 1 – Defining the problem and laying the groundwork for change".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.