The Canadian Securities Administrators has found that the Canadian Investor Protection Fund did not have a complete written procedure in place for complying with board review requirements or the notification requirement in relation to assessment policy changes.
In the “Oversight Review Report of the Canadian Investor Protection Fund,” the CSA revealed that this lack led to two instances in which the CIPF failed to give regulators 60 days’ written notice before effecting changes to processes and procedures that impact the fund’s assessment policies. The written procedure was supposed to ensure that the implementation of such changes would be subject to board review requirements and the notification requirement; moreover, it would clearly define the type of modifications to the assessment policies and related processes and procedures under the board review requirements and the notification requirement.
Nonetheless, staff noted that CIPF’s board greenlit the changes in line with board review requirements and that they overall did not materially modify the policies.
Regulators also noted that the fund incorporated a contingency amount into the regular assessment calculation for mutual fund dealers to tackle possible reforms in CIRO membership and inconsistencies in reporting. CIPF staff clarified the annual contingency amount’s calculation and monitoring in addition to submitting proof that the board had approved it; nonetheless, the written procedure for this process failed to detail the calculation methodology. It also did not describe the approval mechanism; nor did it require the retention of supporting documents.
“Without adequate written procedures, there is a risk of no transparency and consistency in how the contingency amount is calculated, and CIPF may fail to meet the board review requirements. The regulators may also be unable to adequately perform regulatory oversight of CIPF,” the CSA wrote in the report.
The CIPF confirmed that it would develop and implement a procedure for assessment policy changes. It would also further clarify the mutual find dealer fund assessment calculation process to address the annual contingency amount.