Representing Canada s Investment Dealer Firms

Transcription

1 Member Kit November 2015

2 MANDATE THE IIAC: LEADERSHIP FOR CANADA S INVESTMENT INDUSTRY The IIAC works to foster a vibrant, prosperous investment industry driven by strong and efficient capital markets. The IIAC advocates on regulatory, public policy and industry issues to give the investment industry a strong voice and supports members with a full array of services to help them become more successful. WHO WE ARE REPRESENTING CANADA S INVESTMENT DEALER FIRMS The Investment Industry Association of Canada (IIAC) is the national association representing the position of 144 IIROC-regulated investment Dealer Member firms on securities regulation, public policy and industry issues. These dealer firms are the key intermediaries in Canadian capital markets, accounting for the vast majority of financial advisory services, securities trading and underwriting in public and private markets for governments and corporations. The IIAC speaks out on behalf of our members to regulators and government with a strong voice on the issues that matter to the industry and capital markets. It drives greater awareness of business and industry trends and supports its Member firms with a full array of services to ensure their ongoing success. The IIAC s activities are overseen by a 14-member Board of Directors, drawn from its Dealer Member firms. Board members represent all sectors of Canada s investment industry, including: Large retail dealers (non-bank owned) Medium retail dealers Small retail dealers Institutional dealers Integrated dealers (including bank-owned)

3 BOARD OF DIRECTORS Greg Woynarski (Chair) Managing Director, GBM Strategy Office Scotiabank Global Banking and Markets, Scotia Capital Inc. Toronto, ON John Chambers (Vice Chair) Chief Executive Officer FirstEnergy Capital Corp. Calgary, AB Sandy Cimoroni Senior Vice President TD Bank Group, Wealth Management Toronto, ON Steven Donald President Assante Wealth Management Inc. Toronto, ON Mario Frankovich Chief Executive Officer and Chairman Burgeonvest Bick Securities Limited Hamilton, ON Charyl Galpin Head, EVP & Managing Director, BMO Nesbitt Burns Inc., Private Client Division, BMO Financial Group Toronto, ON Monique Gravel Managing Director and Head CIBC Wood Gundy Toronto, ON Jeff Kennedy Managing Director, Equity Capital Markets and Operations Cormark Securities Inc. Toronto, ON David Lang Co-Head, Global Capital Markets and I&TS Compliance RBC Dominion Securities Inc. Toronto, ON Sylvain Perreault Chief Compliance Officer Desjardins Group Montréal, QC Stuart R. Raftus Chief Administrative Officer, Canaccord Genuity Group Inc. President, Canaccord Genuity Wealth Management Canada Toronto, ON Ian Russell President and Chief Executive Officer The Investment Industry Association of Canada Toronto, ON Charles Spiring Vice Chairman & Member, Executive Committee National Bank Financial Wealth Management Winnipeg, MB Deborah Starkman Chief Financial Officer and Secretary GMP Capital Inc. Toronto, ON Terry Hetherington Vice Chairman, Private Client Group Raymond James Ltd. Toronto, ON

4 IAN C. W. RUSSELL PRESIDENT AND CHIEF EXECUTIVE OFFICER Ian Russell is President and Chief Executive Officer of the Investment Industry Association of Canada (IIAC), a position he has held since its inauguration in April Prior to his appointment at the IIAC, Mr. Russell was Senior Vice- President, Industry Relations and Representation, at the Investment Dealers Association of Canada (IDA). In his 20-year tenure with the IDA and the IIAC, he has participated actively in many committees and working groups involved in regulatory and tax issues related to the securities industry and capital markets in Canada. He is a frequent commentator in the media, a regular columnist in industry publications and a sought-after presenter and speaker on industry issues and developments. In January 2014, Mr. Russell was appointed Chair of the International Council of Securities Associations (ICSA). He is the first Canadian in 20 years to serve in this capacity. Mr. Russell has an Honours degree in Economics and Business from the University of Western Ontario, and a postgraduate degree (MSc Economics) from the London School of Economics and Political Science. He has completed the Partners, Directors and Seniors Officers Qualifying Examination and is a Fellow of the Canadian Securities Institute.

5 SUBJECT MATTER EXPERTS Media Inquiries Michael Gotzamanis Manager of Communications Michelle Alexander Vice President and Corporate Secretary Michelle Alexander s areas of expertise include securities law, regulatory issues, analysis and impact of cross-border issues, monitoring and analysis of industry developments, and representation of investment industry positions to securities commissions, self-regulatory organizations and government. Michelle actively advocates on behalf of the industry on matters relating to existing and new regulatory and legislative initiatives, with focus on retail sales issues and compliance. Susan Copland Managing Director Susan Copland works with investment industry stakeholders to establish common positions on a wide range of regulatory developments and advocates on the industry s behalf to improve capital markets regulation in Canada. Susan is involved in regulatory and legislative analysis, current industry issues and trends, regulatory compliance, small dealers and introducing firms, and representation of investment brokerage industry views to securities commissions, self-regulatory organizations and government bodies. Jack Rando Managing Director Jack Rando s areas of expertise include tracking industry performance, trends and developments, capital market analysis, and policy formation. He advocates on behalf of the investment industry to federal and provincial governments, securities commissions and other industry participants.

6 Annie Sinigagliese Managing Director Annie Sinigagliese provides representation to the Quebec Member firms and liaises with securities regulators (including the Autorité des Marchés Financiers and the Investment Industry Regulatory Organization of Canada) and the Quebec government. She possesses extensive knowledge of the investment industry having worked for a major financial institution, an IIROC and FINRA regulated broker-dealer, a SEC regulated Investment Advisor, and the TMX Group. Naomi Solomon Managing Director Naomi Solomon is responsible for key projects supporting the advancement of the Canadian capital markets. Naomi leads analysis and strategy in areas including government relations, finance, pension and tax policy, dealer operations and compliance, financial trends and securities industry developments. She advocates on behalf of investment dealers respecting the regulatory and legislative initiatives of securities commissions, self-regulatory organizations and government that impact industry stakeholders. Andrea Taylor Managing Director Andrea Taylor advocates on behalf of Member dealer firms on a variety of regulatory and tax related issues, including U.S tax reporting and FATCA, shareholder voting and proxy issues, and retirement savings programs. She is responsible for developing written and oral submissions to Canadian and U.S. policymakers on key industry issues, including federal pre-budget recommendations. She frequently leads industry representatives and government stakeholders at educational and roundtable events with the goal of building common knowledge and awareness, resulting in more costeffective securities regulation and stronger and more vibrant capital markets. Adrian Walrath Assistant Director Adrian Walrath s areas of expertise include securities law, regulatory issues, monitoring and analysis of industry developments and representation of investment industry positions to securities commissions, self-regulatory organizations and government. She advocates on behalf of industry on matters relating to existing and new regulatory and legislative initiatives, with a focus on retail sales issues and compliance, including the Client Relationship Model (CRM and CRM2).

7 IIAC MEMBER FIRMS Acker Finley Inc. Acumen Capital Finance Partners Limited AGF Securities (Canada) Limited Aligned Capital Partners Inc. ALL Group Financial Services Inc. AltaCorp Capital Inc. Altus Securities Inc. Argosy Securities Inc. Assante Capital Management Ltd. Aston Hill Financial Inc. ATB Securities Inc. AURAY Capital Canada Inc. B2B Bank Securities Services Inc. Barclays Capital Canada Inc. BBS Securities Inc. Beacon Securities Limited BMO InvesorLine Inc. BMO Nesbitt Burns Inc. BNP Paribas (Canada) Securities Inc. Brookfield Financial Corporation Burgeonvest Bick Securities Limited Caldwell Securities Ltd. Canaccord Genuity Corp. Canadian ShareOwner Investments Inc. CanDeal.ca Inc. Cantor Fitzgerald Canada Corporation Casgrain & Company Limited Chippingham Financial Group CIBC Investor Services Inc. CIBC World Markets Inc. CIT Group Securities (Canada) Inc. Citigroup Global Markets Canada Inc. Clarus Securities Inc. CMC Markets Canada Inc. Cormark Securities Inc. Credential Securities Inc. Credit Suisse Securities (Canada), Inc. CTI Capital Securities Inc. Cumberland Private Wealth Management Inc. D & D Securities Inc. Desjardins Securities Inc. Deutsche Bank Securities Limited Dundee Securities Ltd. Edward Jones Electronic Transaction Clearing Canada, Inc. Euro Pacific Canada Inc. Fidelity Clearing Canada ULC FIN-XO SECURITIES INC. FirstEnergy Capital Corp. Foster & Associates Financial Services Inc. Friedberg Mercantile Group Ltd. GF Securities (Canada) Company Limited Global Maxfin Capital Inc. Global Securities Corporation GMP Securities L.P. Goldman Sachs Canada Inc. Goodwood Inc. Hampton Securities Limited Harbourfront Wealth Management Haywood Securities Inc. HSBC Securities (Canada) Inc. Independent Trading Group (ITG) Inc. Industrial Alliance Securities Inc. Instinet Canada Limited Integral Wealth Securities Limited Interactive Brokers Canada Inc. Investors Group Securities Inc. IPC Securities Corporation ITG Canada Corp. J.P. Morgan Securities Canada Inc. JC Clark Ltd. JitneyTrade Inc. Jones, Gable & Company Limited K.J. Harrison & Partners Inc. Kingwest & Company Lakeshore Securities Inc. Laurentian Bank Securities Inc. Leede Financial Markets Inc. Lightyear Capital Inc. 3Macs Mackie Research Capital Corporation Macquarie Capital Markets Canada Ltd. Maison Placements Canada Inc. Mandeville Private Wealth Inc. Manulife Securities Incorporated Maple Futures Corp. Maple Securities Canada Limited McLean & Partners Wealth Management Ltd.

8 MD Management Limited Merrill Lynch Canada Inc. Middlefield Capital Corporation Mirabaud Canada Inc. Morgan Stanley Canada Limited National Bank Direct Brokerage Inc. National Bank Financial Inc. National Bank Financial Ltd. NBCN Inc. Octagon Capital Corporation Odlum Brown Limited OMG Wealth Management Inc. Paradigm Capital Inc. Pavilion Global Markets Ltd. PEAK Securities Inc. Perron & Partners Wealth Management Corp. Pershing Securities Canada Limited Peters & Co. Limited PI Financial Corp. Pictet Canada L.P. Pollitt & Co. Inc. Portfolio Strategies Securities Inc. Professional s Financial Private Management PWL Capital Inc. Qtrade Securities Inc. Queensbury Securities Inc. Questrade Inc. R.J. O Brien & Associates Canada Inc. Raymond James Ltd. RBC Direct Investing Inc. RBC Dominion Securities Inc. Renaissance Capital Inc. Retire First Ltd. Richardson GMP Limited Rogers Group Investment Advisors Ltd. Rothenberg Capital Management Inc. Salman Partners Inc. Sandstone Asset Management Inc. Scotia Capital Inc. Sherbrooke Street Capital (SSC) Inc. Société Générale Capital Canada Inc. Solium Financial Inc. Sprott Private Wealth LP. State Street Global Markets Canada Inc. Stuart Investment Management Limited TD Securities Inc. TD Waterhouse Canada Inc. Timber Hill Canada Company Trapeze Capital Corp. Tuscarora Capital Inc. UBS Securities Canada Inc. Velocity Trade Capital Inc. Watt Carmichael Inc. W.D. Latimer Co. Limited Wolverton Securities Ltd. Worldsource Securities Inc.

9 AFFILIATES IIAC Affiliates are non-investment dealer firms that operate within, or provide services to the investment industry both in Canada and internationally. They include market participants (i.e. custodians and investment managers), service and infrastructure providers and investment industry suppliers. For information regarding the IIAC Affiliate program, please Pauline Flores at

10 HIGHLIGHTS OF OUR ACHIEVEMENTS Client Relationship Model Phase 2 (CRM2) The issue: In July 2013, the Canadian Securities Administrators (CSA) introduced new amendments requiring registered firms to provide investors with enhanced client statements effective July 15, 2015, and better disclosure around fees and investment performance effective July 15, Meeting these so-called Client Relationship Model Phase 2 (CRM2) requirements will heavily depend on firms ability to update and upgrade their relevant technology and integrate their systems, and to educate and train their advisors so they can effectively address their customers questions and concerns all in all, a costly, complex and challenging initiative. What we got for you: The IIAC led the push for implementation dates to align with the calendar year. Our efforts paid off. In January 2015, the CSA announced that it will give the industry to the end of 2015 to adopt the CRM2 requirements that were due to take effect on July 15, Additionally, firms that provide performance reports for calendar 2016 will not be required to include comparative data from 2015 in those reports. Firms will be able to base their first investment performance reports on 2016 information alone. How does this benefit me? You now have until the end of 2015 to get ready for the new statement disclosure requirements, allowing for a smoother and more efficient transition. Basing the first performance reports on 2016 information only will free up time and resources for your firm to accomplish other objectives. Disciplinary Sanctions The issue: The IIAC supports the efforts of the Investment Industry Regulatory Organization of Canada (IIROC) to provide transparency to Dealer Members regarding the general principles and key factors for determining appropriate disciplinary sanctions in the event of regulatory misconduct by registered employees. However, the IIAC was concerned with the language of an IIROC Policy Statement (released for comment in November 2013) which stated that firm-imposed disciplinary action (i.e. fine or suspension) may reduce regulatory sanctions arising from IIROC disciplinary proceedings. The IIAC stressed that internal discipline should be a key factor for the Hearing Panel to consider in determining an appropriate sanction. What we got for you: In January 2015, the IIROC Staff responded positively to the IIAC s concerns. The IIROC Staff acknowledged that internal discipline is an important factor for the Hearing Panel to consider, and recognized the value and importance of internal discipline in a Dealer Member s efforts to foster a culture of regulatory compliance. How does this benefit me? Dealer Members now have assurance that a credit will be accorded for any fine or suspension that may have been imposed upon an individual respondent as a result of internal disciplinary action. This will prevent some respondents from receiving disproportionate sanction.

11 Specified Foreign Property (SFP) Tax Reporting The issue: Form T1135 must be completed and filed with the Canada Revenue Agency (CRA) by all Canadianresident taxpayers that hold specified foreign property (SFP) exceeding C$100,000 at any time during the year in an account with a Canadian registered securities dealer or a Canadian trust company. This Form has created significant challenges for taxpayers and tax preparers. The CRA relieved some of the filing burden by adopting a streamlined reporting option that allows taxpayers to report the aggregate value of all such property on a country-by-country basis. There is no need to segregate the SFPs by categories (e.g. shares, debt of foreign governments, interest in foreign rental properties etc.). The total value to be reported is the highest month-end fair market value during the year (that appears on the investment statement) as well as the fair market value at year end. This aggregate reporting is done in a newly-created Category 7 on the Form T1135. This streamlined reporting method, while welcomed, created confusion in interpretation and methodology. What we got for you: The IIAC came to the rescue. It produced a worksheet showing the correct way to calculate aggregate fair market value of SFP by country. It was reviewed and approved by the CRA in early 2015, just in time for the tax reporting season. The worksheet was made available online on IIAC s membersonly website in advance of being posted on the CRA s website. How does this benefit me? The IIAC s leadership resulted in a reduction in the tax compliance and administrative burden for 2014 (and later taxation years). Canadian registered securities dealers have a new value-added tool, the IIAC s worksheet, to assist their clients who have some foreign investments in their portfolio. The IIAC s worksheet is particularly useful for small dealers that are asked to help taxpayers provide information necessary to complete the Form T1135. Binary Options The issue: Binary options have surged in popularity in recent years. They are a type of options contract in which the payout depends entirely on whether the price of a particular asset that underlies the binary option rises above or falls below a specified amount, at a specific time, on a particular day. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Much of the binary options market operates through Internet-based trading platforms (many based overseas) that are not registered to conduct business in Canada and are not complying with applicable regulatory requirements. The IIAC is aware of numerous unregistered trading platforms currently soliciting Canadians, and of Canadians complaining of fraud associated with Internet-based trading platforms that buy or trade binary options. The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades. The IIAC voiced its concerns to the Canadian Securities Administrators (CSA). What we got for you: Regulators listened to the IIAC s concerns. In March 2015, the CSA issued an Investor Alert warning investors to exercise caution when considering an investment in binary options. The CSA published a black list of 37 unregistered trading platforms currently soliciting Canadians. It encouraged all Canadian investors to visit to check the registration of any person or company offering binary options, and to contact their local securities regulator if they have invested with these or other offshore binary options trading platforms. The IIAC will continue to work with regulators to tighten their controls on those who subvert our marketplaces and enrich themselves at the expense of Canadian investors.

12 How does this benefit me? Our efforts recognize and support the registered trading platforms and the strong and honest reputation of the registered broker-dealers operating in Canada who are leaders in providing investors financial protection and transparency. Committed Orders The issue: In October 2011, the Bourse de Montréal announced its intention to facilitate electronic prearranged transactions and cross transactions for eligible options and futures contracts listed on the exchange. To enable this, it published for comment proposed rule changes. However, divergent views among participants as to the impact of the proposed rule changes on the market had led to a stalemate. What we got for you: The IIAC and its Derivatives Committee were instrumental in kick-starting the dialogue among participants and with regulators. Our efforts were rewarded. On May 7, 2015, the Rules and Policies Committee of Bourse de Montréal announced it is implementing the changes effective June 26, How does this benefit me? Approved participants i.e. dealers will be able to execute prearranged transactions and cross transactions without execution risk. This will enhance liquidity in the Canadian derivatives market and should foster growth of the institutional options and futures market. Tax-Free Savings Accounts (TFSAs) The Issue: More than 11 million Canadians have a Tax-Free Saving Account (TFSA). In 2011, the Harper government promised to double the TFSA annual contribution limit (from $5,000 to $10,000) once the budget is balanced. Some argued that a doubling of the annual contribution limit would only benefit the wealthy and, therefore, the government should not proceed. The IIAC argued that higher household saving provides funds for new capital investment and business expansion needed to promote economic growth. Additionally, accumulated TFSA savings will eventually be spent, generating further economic activity and new tax revenue. What we got for you: The 2015 federal budget increased the TFSA annual contribution limit to $10,000, effective for the 2015 and subsequent taxation years. How does this benefit me? The increase in the TFSA contribution room opens up new retirement income planning possibilities, particularly for clients 65 years of age and over who account for roughly one-quarter of TFSA holders, and especially clients over the age of 71 i.e. the 1.5 million of which have a TFSA who can no longer contribute to a RRSP. Registered Retirement Investment Funds (RRIFs) The Issue: Since 1992, Canadians with Registered Retirement Investment Funds (RRIFs) are required to withdraw a set minimum percentage from their account annually. With life expectancy steadily increasing and real returns on investments expected to remain low, many Canadians face a significant risk of outliving their savings. The IIAC called on the federal government to eliminate the rules mandating minimum yearly drawdowns from RRIFs and similar accounts.

13 What we got for you: While minimum annual withdrawal requirements were not entirely eliminated, the government did announce in the 2015 federal budget lower RRIF minimum withdrawal requirements for individuals age 71 to 94 inclusive. This measure will apply for the 2015 and subsequent taxation years. How does this benefit me? Seniors now have more flexibility and longer income tax deferral. According to Finance Canada, a 90-year old will have 50 per cent more capital as a result of the changes. With more capital to work with, clients can have a wide-ranging portfolio of retirement investments under the umbrella of a RRIF. Common Reporting Standard (CRS) for Automatic Exchange of Tax Information The Issue: On July 21, 2014, the OECD released the Standard for Automatic Exchange of Financial Account Information in Tax Matters. It calls on governments to obtain detailed financial account information (including account balances, interest, dividends and sales proceeds from financial assets) from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis to help combat cross-border tax evasion and protect the integrity of the tax systems. Canada is one of more than 90 tax jurisdictions that have committed to implementing the CRS. More than 40 of these countries (not including Canada) pledged to achieve automatic information exchanges in 2017 (i.e. the early adopters). The IIAC proposed to the federal government that it start collecting data in mid-2017 and start sharing it in What we got for you: In the 2015 federal budget, the government announced that the CRS will be implemented on July 1, 2017, allowing for the first exchange of information in 2018 exactly what the IIAC had asked for. How does this benefit me? The CRS effective implementation dates will provide Canada s financial services sector time to prepare, particularly as it continues to adapt to the requirements of the U.S. Foreign Account Tax Compliance Act (FATCA). Research Report Quiet Periods The issue: A quiet period extends from the day after a prospectus offering to the first date on which analyst research reports may be published. Quiet periods allow independent analysis to reach investors before dissemination of research reports by Dealer Members who participated in an offering by acting as lead and colead underwriters. The Investment Industry Regulatory Organization of Canada (IIROC) prohibited dealers from issuing research reports for 40 days following an initial public offering (IPO) and for 10 days following a secondary offering. In the U.S., the Financial Industry Regulatory Authority (FINRA) reduced quiet periods from 40 days to 10 days in respect of initial public offerings, and from 10 days to three days in respect of secondary offerings, effective September 25, The IIAC asked IIROC to harmonize quiet period requirements with those in the U.S. in the context of Canada-U.S. cross-border initial public offerings and secondary offerings. The IIAC also asked IIROC to reduce quiet periods for domestic Canadian offerings, but not necessary match those in the U.S. given it takes a couple of months for the Securities and Exchange Commission (SEC) to review a preliminary prospectus before issuing a final prospectus, whereas in Canada, it is usually takes four weeks.

14 What we got for you: IIROC agreed with the IIAC and reduced quiet periods to ensure consistency with similar changes in the U.S. How does this benefit me? The IIAC s efforts to persuade IIROC to harmonize quiet periods with those in the U.S. ensure a level playing field for research report dissemination in the context of Canada-U.S. cross-border initial public offerings and secondary offerings. Canadian investors will now have access to timely information and will not be deprived of research and analysis when compared to corresponding U.S. investors. Similarly, harmonizing the quiet period with the U.S. will preserve Canadian investor and Dealer Member participation in cross-border transactions. Dealer Members will face lower administrative and compliance costs because they do not have to administer a different dissemination period. Rights Offering Regime The issue: A company can raise capital by offering the right to existing security holders to purchase additional securities at what is typically a discounted price. Existing shareholders are, thus, afforded the opportunity to protect themselves from dilution. The issuer must file a prospectus, unless they can rely on a prospectus exemption. The prospectus exemption is available if certain conditions are met including the preparation of an extensive rights offering circular and its review and acceptance by the relevant securities regulators. Given the time, costs and limitations of the prospectus exemption, rights offerings have been relatively uncommon in Canada and have most often been done by smaller issuers with limited equity financing alternatives. What we got for you: The IIAC suggested a number of improvements to the existing rights offering regime. The Canadian Securities Administrators (CSA) responded positively. On September 24, 2015, the CSA announced the approval of an amended, more flexible and streamlined prospectus exemption for rights offerings by reporting issuers. Rights offering circulars will no longer have to be reviewed and cleared by securities regulators. Additionally, the permitted size of prospectus-exempt rights offerings will increase significantly. The new rules are expected to come into force on December 8, How does this benefit me? The adoption of a more flexible and streamlined rights offering regime will make it more attractive for issuers to raise fresh capital from existing security holders. The elimination of the requirement for prior regulatory review of rights offering circulars will cut the process by 40 days, on average, according to the CSA. Proficiency Assurance Model The issue: On July 16, 2014, the Investment Industry Regulatory Organization of Canada (IIROC) launched consultations with respect to its proficiency assurance model, which is designed to ensure the highest level of ethics, proficiency and professionalism among those licensed by IIROC. The IIAC participated in the consultations and advocated a multi-education provider model where IIROC approves and oversees course providers, unbundles course offerings, and develops and administers a standardized exam. The IIAC also recommended that IIROC adopt competency standards and benchmarks, and that it review its mandatory continuing education requirements as well as its fees to ensure value for money. What we got for you: On September 22, 2015, IIROC announced a new proficiency assurance model. While it decided that a single provider would offer IIROC mandated courses and examinations, it did agree with the

15 IIAC s recommendation to set and publish objective competency standards that will represent a proficiency benchmark for the course-based licensing requirements. IIROC also adopted the IIAC s recommendation to review the continuing education process and to negotiate a new pricing structure that will place caps on price increases for the Canadian Securities Course. How does this benefit me? The IIAC s push for continuous improvement in the quality of course content as well as service requirements for regulatory courses will enhance the proficiency of individual registrants working for IIAC Dealer Member firms, while providing more value relative to costs. Anti-Money Laundering Regulations The issue: The IIAC and its Dealer Member firms have participated in numerous consultations with the federal Department of Finance over the last few years concerning Canada s anti-money laundering (AML) and antiterrorist financing regime. In general, the IIAC felt the federal anti-money laundering legislation imposed extensive and onerous requirements on financial institutions to confirm client identity, and requested changes to minimize the compliance burden of its Member firms. What we got for you: In June 2015, Finance Canada released proposed AML regulatory amendments and the IIAC submitted comments in late August. The IIAC is pleased that the Regulations now provide broader and more flexible methods that firms can use to verify client identity. Additionally, there are some positive changes regarding the due diligence requirements for financial institutions when dealing with a politically exposed person (PEP) an individual who is or has been entrusted with a prominent public function, or a relative or known associate of that person who due to his/her position and influence, is more susceptible to being involved in bribery or corruption. Finally, reporting entities were not required to keep records when conducting transactions with public bodies or corporations with a minimum of $75 million net assets whose shares are traded on a Canadian or other designated stock exchange. The IIAC s asked the federal government to extend this exemption to all listed corporations without regard to the amount of net assets. The government answered our call. How does this benefit me? The regulatory amendments to Canada s AML regime will improve Canada s compliance with international standards, while minimizing the compliance burden for IIAC s Dealer Member firms. Marketplace Thresholds The issue: In 2012 and 2014, the Investment Industry Regulatory Organization of Canada (IIROC) solicited comment on the approaches that it might take with establishing Marketplace Thresholds (i.e. specific price thresholds beyond which a marketplace must preclude trading activity). Marketplace Thresholds prevent erroneous orders; they control short-term, unexplained price volatility; and they promote fair and orderly markets in an electronic trading environment. IIROC had proposed that each marketplace have the discretion to adopt thresholds that are appropriate for the type of trading on that marketplace and that dark marketplaces need not adopt thresholds based on the limitations in place on the execution of dark orders. The IIAC argued that different standards create inefficiencies and can result in opportunities for regulatory arbitrage, i.e. for erroneous trades to trade on one marketplace after being halted on another. The IIAC called on IIROC to harmonize Marketplace Thresholds and ensure they are implemented on all marketplaces, including dark marketplaces.

16 What we got for you: IIROC adopted the IIAC s recommendations. On August 25, 2015, it issued Guidance (effective August 25, 2016), establishing the operation of prices thresholds beyond which orders must be prevented from trading. Each marketplace in Canada that has retained IIROC as its regulation services provider, including dark marketplaces, must adopt Marketplace Thresholds. How does this benefit me? As a result of IIAC s efforts, there is now uniform application of price thresholds across all marketplaces. This will ensure orders are not subject to a freeze on one marketplace while continuing to trade on another, resulting in fair and orderly markets. Market integrity is better served because there is a higher degree of predictability as to when Marketplace Thresholds will be triggered, helping to enhance investor confidence. U.S. Internal Revenue Code Section 871(m) The issue: In 2013, the Internal Revenue Service (IRS) released proposed rules with a new test to determine if a payment made to a non-resident individual or a foreign corporation pursuant to a notional principal contract (NPC) or an equity-linked instrument (ELI) is a dividend-equivalent payment and, therefore, subject to a 30% withholding tax. The test is based on the delta of the payment i.e. the ratio of a change in the fair market value of a contract to a small change in the fair market value of the property referenced by the contract. The IIAC pointed to the technical complexities of correctly identifying, reporting and withholding on transactions under the proposed regulations for financial institutions. The IIAC also argued that the infrastructure does not exist in the marketplace to support delta test determination. Given these challenges, the IIAC asked the IRS to delay the effective implementation date of the regulations. What we got for you: On September 17, 2015, the U.S. Department of the Treasury and the IRS published final and temporary regulations, under tax code section 871(m). They adopted many of the IIAC s recommendations, including the adoption of a higher delta threshold (0.8 instead of 0.7) which is to be calculated only when the instrument is issued. The new provisions will generally apply to payments made with respect to transactions issued on or after January 1, How does this benefit me? The IIAC has been the predominant voice representing the Canadian financial services industry on the issue of U.S. tax code section 871(m). As a result of the IIAC s efforts, brokers will have adequate time to build the systems needed for withholding and reporting. Additionally, the change in the delta threshold test (from 0.7 to 0.8) for determining which payments will be subject to U.S. withholding will minimize potentially over-including payments that should not be subject to these provisions.

17 COMMITTEES Comprised of Members with expertise in particular issues and topics, the IIAC s committees serve to: Provide a forum to share ideas and concerns on industry issues and network with other industry professionals; Assist in the development of responses to regulatory and government initiatives and propose rule improvements; Provide input and assistance to, and engage in dialogue with, domestic and international regulators and governments on policies and regulations affecting the Canadian investment industry; and Develop and exchange industry best practices. In addition to committees, which are permanent in nature and address specific ongoing priority issues, there are also Working Groups (i.e. ad hock task forces) which are set up from time-to-time to focus on particular topics. These Working Groups are often set up by, and report to, a committee. IIAC Committees Compliance Committee The Compliance Committee reviews the formulation of rules and policies governing industry practices and standards and undertakes studies on matters relating to client dealings and compliance. The Committee also monitors and comments on regulatory and legislative proposals relating to compliance and supervisory systems. It provides a forum for the exchange of best practices and discusses issues of common concern. It provides a catalyst for the creation of business tools to help members comply with regulation cost-effectively. In addition, the Committee suggests topics for educational programs and seminars. Debt Markets Committee The Debt Markets Committee represents the securities industry position on policy and regulatory proposals related to activity in primary and secondary debt markets. It acts on behalf of the securities industry in representations to authorities on matters including transparency and market regulation. The Committee participates with other foreign organizations to share conventions for dealing in international debt markets. Derivatives Committee The Derivatives Committee engages in dialogue with regulators, SROs and governments on policies and regulations affecting the derivatives markets and business practices of participants; comments on legislative and regulatory initiatives that affect the derivatives industry; serves as a forum where derivatives market participants share ideas and concerns on various industry issues and explores operational efficiencies that will benefit markets, investors and participants; and Identifies measures to enhance the reputation and profile of the industry, including helping build a better understanding of derivatives and their uses. Equity Markets Committee The Committee represents the securities industry on proposed provincial legislation and regulations governing market-making and trading in secondary equity markets, and market structure. The mandate of

18 the Committee is to develop and articulate policies that relate to transactional activity and structural change in domestic markets and that contribute to efficient, competitive and well-functioning markets. Insurance Committee The Insurance Committee provides firms a platform for an open exchange of best practices and ideas, discussion on various sectors of interest, as well as analysis of new rules and provincial regulations impacting the retail insurance business. Topics have included continuing education for insurance registrants, estate planning issues and new products. Investment Banking Committee The Investment Banking Committee develops and represents the securities industry position on provincial securities legislation and regulations related to the primary markets, including disclosure of corporate finance transactions and restructurings, such as going-private transactions. Ombudsman for Banking Services and Investments (OBSI) Committee The OBSI Committee meets regularly with the Ombudsman and staff to discuss issues and prospective changes in OBSI s operations and governance. The Committee regularly works with the Canadian Bankers Association (CBA) and the Investment Funds Institute of Canada (IFIC) to submit industry position papers relating to matters on the OBSI Board agenda, prior to each OBSI Board meeting, and responds to requests for comments issued by OBSI or other regulators in relation to dispute resolution. Online Brokerage Committee The Online Brokerage Committee represents the views and interests of online brokerage firms and their clients. It addresses the needs of these firms by providing a forum to discuss issues affecting the industry and investors and a peer network for firms to share information and experience. The Committee acts as the voice of the online brokerage sector when dealing with regulators, and it provides input on legislative and regulatory requirements to ensure that the concerns of Member firms are appropriately considered on these matters. Private Client Committee The Private Client Committee provides members with advice and advocacy on policy issues pertaining to the retail business of the securities industry. Such policy issues include the review and consideration of the impact of regulation and trends on retail business activities. The Private Client Committee also focuses on investor confidence and measures to enhance industry reputation and profile. Regional Committees Regional Committees are the primary means to exchange ideas on issues and to provide input on policy matters of both regional and national spectrum, including securities legislation; regulatory, capital markets and government policy initiatives; and business practice issues. Registered Plans Committee The Registered Plans Committee reviews proposed amendments to federal and provincial legislation targeting various registered plans such as RRSPs, RRIFs, TFSAs and RESPs. The Committee reviews proposed changes from both an operational and policy perspective and develops securities industry positions on practical and conceptual matters surrounding the administration of these plan accounts. The Committee interacts with federal and provincial governments as well as domestic tax authorities to address concerns, providing recommendations and proposing solutions. The Committee also serves as a forum for the securities industry to explore additional operational efficiencies in the administration of the plans.

19 Small Dealers / Introducing Firms Committee The Small Dealers / Introducing Firms Committee represents the views and interests of small Member firms, including introducing firms. It addresses the needs of these firms by providing a peer network for firms to share information and experience. It also provides input on legislative and regulatory requirements to ensure that the specific concerns of such firms are appropriately considered on these matters. Tax Reporting Committee The Tax Reporting Committee reviews proposed amendments to federal and provincial tax legislation from an operational perspective, comments on proposed tax reporting forms and develops securities industry positions on practical and conceptual matters surrounding tax reporting, tax-sheltered investment plans and other tax-related matters. The Committee interacts with federal and provincial governments to address concerns, providing recommendations and proposing solutions. The Committee also works with Canadian Depository for Securities Limited (CDS) regarding enhancements to tax reporting, reconciliations and other tax-related services that CDS Clearing & Depository Services Inc. provides. Finally, the Committee works with issuers to ensure timely reporting on the CDS Innovations tax factor reporting website so that investors can receive tax slips on a timely basis. U.S. Tax Committee The U.S. Tax Committee reviews and comments on proposed amendments to U.S. tax withholding and reporting legislation, regulations and policies. It develops Canadian securities industry positions on practical and conceptual matters surrounding U.S. tax withholding and reporting requirements, including advocacy and developing best practices. Communications Committee The Communications Committee s works to further the growth and development of the Canadian investment industry by reviewing and sharing communications best practices. It is comprised of senior industry communications and marketing professionals, addresses topics that include the communication of industry issues relating to IIAC activities and industry news, how information is communicated, and the effectiveness of the communications. Working Groups Anti-Money Laundering Working Group Broker Warrant Working Group Canadian Anti-Spam Legislation (CASL) Working Group Compliance Procedures and Audit Process Working Group CRM2 Communications Working Group CRM2 Fees and Compensation Working Group CRM2 Implementation Working Group CRM2 Market Value Working Group CRM2 Performance Reporting Working Group CRM2 Position Cost Working Group Cybersecurity Working Group Dark Pools Working Group Deposit Type Instrument Working Group Due Diligence Procedures Direct Electronic Access Working Group Emergency Preparedness Working Group

20 Electronic Trading Working Group Exchange-Traded Funds Working Group Exempt Market Issues Working Group FATCA Capital Markets Working Group Fee Based Accounts Working Group Fiduciary Duty Working Group Financial Hardship Unlocking Working Group Financial Planning Working Group GST Review Working Group Hard to Value Securities Working Group IIAC Roundtable on Personal Financial Dealings Working Group IIROC Draft Guidance on Borrowing Working Group IIROC Enforcement Rules Working Group IIROC Guidance & Compensation Structures Working Group IIROC Sanction Guidelines Working Group Immigrant Investor Program Working Group Market Data Fees Working Group Modernization of Investment Fund Product Regulation Working Group Mortgage-Backed Securities Working Group New Issues Not Available in Quebec Working Group OECD Common Reporting Standard Working Group Order Protection Rule Working Group Outsourcing Working Group Performance and Reporting Working Group Point of Sale Working Group Proficiency Assurance Model Working Group Prospectus Exemptions Working Group Proxy Voting and Shareholder Communications Working Group Registered Plans Best Practices Working Group Research Analyst Standards Working Group Revenue Quebec Working Group Securitized Products Working Group Self Trade Procedures Take Over Bid Regulation Tax Free Savings Accounts Issues Working Group Tax Policy Working Group Tax Reporting Committee Adjusted-Cost-Basis Working Group Tax Reporting Committee Spreadsheet Working Group Tax Reporting Committee T1135 Working Group Tax Threshold/Amendments Working Group Trade Repository Working Group Unclaimed Intangible Property Act Working Group Venture Market Working Group

21 THE IIAC IN THE NEWS Tue, Jun 30, Ian Russell, IIAC President & CEO, sat down with Michael Hainsworth at BNN to discuss the deterioration in global bond market liquidity and the international regulatory reform agenda. By Ian Russell, IIAC President and CEO

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24 IIAC SIGNATURE EVENTS The IIAC Investment Industry Hall of Fame provides a platform to pay tribute to the talent and integrity of professionals in Canada s investment industry. These individuals have played a pivotal role in the development and growth of the investment industry and capital markets in Canada, and have contributed greatly to the financial security of many Canadians. Each year s Inductees are recognized and celebrated at a Gala Dinner held annually in late October. For more information on this prestigious event, click here. The IIAC Top Under 40 Award recognizes an individual under the age of 40 whose drive, dedication and personal and professional qualities and accomplishments mark them as a future leader in the investment industry. IIAC TOP UNDER 40 AWARD The IIAC Top Under 40 Award recipient is announced at the 2015 IIAC Investment Industry Hall of Fame Gala Dinner and Induction Ceremony held annually in late October. Get to know the next generation of industry leaders. For more information, click here. Take Our Kids to Work TM day falls on the first Wednesday of November every year. Grade 9 students are hosted at workplaces across the country. The IIAC s Toronto office hosts one-hour workshops, centering on educating students about Canada s capital markets and the securities industry and the many career opportunities in the sector. Students may choose to attend one of two workshops offered a morning session or an afternoon session. The workshops are open to any Grade 9 student related to an employee of an IIAC Member dealer firm. For more information, click here.

25 This annual, full-day event offers perspectives on topical issues impacting compliance and operations professionals within Canada s securities industry. The most recent event included an IIROC staff Review of the IIROC Annual Compliance Report and discussions on Point of Sale, T+2, global tax information reporting and cybersecurity. IIAC Compliance and Operations Symposium This annual full-day event offers an opportunity to hear from industry professionals about practical and solution-driven discussions about current policy and regulatory issues affecting small and independent dealers. The most recent event focused on cyber security, Canadian Anti-Spam legislation and related compliance issues, tax related issues affecting small dealers, legal issues affecting small dealers, and moving to managed accounts. IIAC Small and Independent Dealers Symposium IIAC Cybersecurity Conference The 2015 full-day conference engaged local and international experts to assist IIAC s members in protecting their firm and their clients against cybersecurity threats. This important event provided practical information about how the financial industry is, and should be dealing with such threats. Topics covered included: establishing a Governance and Risk Management Framework to Promote Cybersecurity; assessing risk and critical assets; regulatory perspectives on cyber security; dealing with law enforcement and other legal considerations for cyber incidents; implementing preventative measures and internal controls; and detecting threats and developing a recovery plan to minimize damage.

26 CANADA S SECURITIES INDUSTRY DID YOU KNOW? Facts and statistics underscoring the securities industry s contributions to Canadians and the Canadian economy The Canadian securities industry plays a key role in Canada s financial services sector. It enables businesses and governments to raise debt and equity capital which stimulates economic growth and job creation and helps investors and savers work towards their financial objectives. In 2014, Canada s Securities industry: Helped listed Canadian businesses raise $42.8 billion in equity capital in secondary offerings in public and private markets, enabling them to grow and expand which, in turn, stimulated demand for goods and services in the economy. Helped 14 companies go public, raising $3.5 billion in initial public offerings. This money can be used to expand operations, purchase machinery and equipment, fund research and development, or attract top talent to their enterprises by offering stock incentives that give key employees an ownership stake in the business. Enabled Canadian businesses to raise $85.8 billion by issuing bonds to finance operations. These bonds provided Canadian investors a steady flow of income and capital preservation. Enabled the federal, provincial and municipal governments to raise $164.2 billion through debt issuance to fund improvements to public infrastructure schools, roads and hospitals and other services valued by Canadians. Managed just over $300 billion in Registered Retirement Savings Plans (RRSPs), $38 billion in Tax Free Savings Accounts (TFSAs) and $94 billion in Registered Retirement Income Funds (RRIFs) on behalf of Canadians, helping them prepare for their retirement. Employed approximately 40,000 Canadians from coast-to-coast in small regional dealer firms with a few employees to large national dealer firms with thousands of employees.

27 IIAC INDUSTRY JOB BOARD Here you will find job descriptions for a wide range of industry positions at IIAC member firms and affiliates, provincial securities commissions and IIROC. To post a job to the IIAC s Industry Job Board, the job description, as a Word attachment or PDF, to [email protected]. Please include any relevant information such as the closing date and application instructions. You will be notified by once the job is posted.

28 WHY THE IIAC S MEMBERS THE IIROC-REGULATED INVESTMENT DEALER FIRMS MATTER TO YOU, THE INVESTOR The Investment Industry Regulatory Organization of Canada (IIROC) is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. IIROC sets high-quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets. Choosing an investment advisor is one of the most important decisions you will make. IIROC-regulated advisors are able to offer a wide range of products and services, ranging from mutual funds, guaranteed investment certificates, stocks, bonds and options to more complex alternatives. Advisors approved by the IIROC to offer services at IIROC-regulated firms must pass financial, professional and personal background checks before they can be registered to work at IIROC-regulated firms. When you choose an advisor at an IIAC Member dealer firm, you can be sure that IIROC has made sure he or she has the necessary training and education. For service complaints, IIROC rules require firms to respond in writing to all written complaints. For complaints that involve possible rule infractions regarding a client s account, IIROC rules require firms to acknowledge complaint within five business days and provide their final decision within 90 calendar days. There are also options available to investors for seeking compensation if they are not satisfied with a firm s response. These options include mediation, arbitration, taking their case to the Ombudsman for Banking Services and Investments (OBSI), and pursuing legal action. In the rare case an IIROC-registered firm were to become insolvent, your cash and securities are protected within defined limits by the Canadian Investor Protection Fund (CIPF). CIPF is funded by IIROC-regulated firms and their membership is mandatory.

29 CONNECT WITH THE IIAC ON SOCIAL MEDIA For the latest IIAC news, events, commentary and more, connect with the IIAC on your preferred social media platform by clicking the links below. Facebook Google+ LinkedIn YouTube Flickr IIAC Blog To access the IIAC s Social Media Policy, click here. Contact Information TORONTO 11 King Street West, Suite 1600 Toronto, ON M5H 4C7 Tel: Fax: MONTRÉAL 1 Place Ville Marie, Suite 2001 Montréal, QC H3B 2C4 Tel: Fax: VANCOUVER 701 West Georgia Street, Suite 1500 Vancouver, BC V7Y 1C6 Tel: Fax: