The Canadian Securities Administrators (CSA) has published its report on its annual risk-based oversight review of the Canadian Investment Regulatory Organization (CIRO), targeting particular processes within the functional areas of information technology, membership intake, and trading conduct compliance.
The report seeks to assess whether CIRO has complied with the relevant terms and conditions of regulators’ recognition orders in the three functional areas reviewed and whether regulatory processes have been effective, efficient, and consistently and fairly applied.
In the report, CSA staff identified three medium-priority findings.
First, CSA staff determined that CIRO fell short of sufficiently independently assessing internal controls for the continuing education reporting and tracking system (CERTS). Staff noted that failing to conduct an adequate independent review could cause internal control issues for a system the CSA deemed critical to CIRO.
Second, CSA staff pointed out an issue with CIRO’s continued use of a cloud service outside of Canada. Staff stressed that data protection regimes distinct from those in place in Canada could govern data residing outside the country.
Third, CSA staff found that CIRO’s regional office in Quebec lacked clearly defined responsibilities and staff dedicated to analyzing, reviewing, and formulating recommendations for membership applications submitted by firms and/or members with head offices within the province.
Staff noted that an absence of clearly defined responsibilities concerning membership in the Quebec regional office could contradict the requirements of term and condition 21(1) of the Autorité des marchés financiers’ CIRO recognition order.
Resolving findings
CSA staff told CIRO to correct the issues identified in these findings by taking specific and timely steps. Staff acknowledged that CIRO established an action plan to resolve these findings and already addressed issues found in the previous oversight report.
According to the CSA’s news release, apart from those three findings, staff expressed no other concerns with CIRO.
In the report, CSA staff identified other expectations and potential improvement areas relating to CIRO’s practices and procedures across the three functional areas reviewed.
CIRO is the national self-regulatory organization tasked with overseeing mutual fund dealers, investment dealers, and trading activities in Canada’s equity and debt marketplaces.
The CSA, which serves as the council of the securities regulators of Canada’s provinces and territories, seeks to coordinate and harmonize regulation across the country’s capital markets.