IIAC Blog

December 23, 2014

IE: IIAC steps up lobbying to delay CRM2

DeadlineThe following article, which was written by James Langton and appears today on Investment Executive.com, outlines why the IIAC is urging the Canadian Securities Administrators (CSA) to agree to an extension of the CRM2 implementation deadline:

The Investment Industry Association of Canada (IIAC) is stepping up its push for an extension to the final implementation of certain reporting requirements under the Client Relationship Model (CRM2).

In a letter to Bill Rice, chairman of the Canadian Securities Administrators (CSA) and chairman and CEO of the Alberta Securities Commission (ASC), the IIAC sets out its case for pushing back the deadline for implementing new cost and performance reporting requirements to the end of 2016. At the same time, it says that requirements that are slated to be implemented on July 15, 2015, but have not been finalized by regulators, should also have an optional inception date of Jan. 1, 2016.

The letter responds to a request from the CSA for more information supporting its initial call for a delay in the implementation of the final reporting requirements. The IIAC has argued that firms should be given an extra five and half months to the end of 2016 in order to allow for reporting based on a calendar year end, which would be logical to investors.

“The IIAC’s request for calendar-year adjustments is due to our members’ serious concern regarding risk to the achievement of CRM2’s goals, not only due to the scope of systems changes in very tight timelines, but also to the diminishing period until the implementation dates without the rules yet being final in several material ways,” it says in this new letter to the CSA.

The letter argues that these modifications to the planned implementation deadlines are in investors’ best interests. Although the Ontario Securities Commission’s (OSC) Investment Advisory Panel (IAP) has explicitly come out against any further delay to final implementation of CRM2.

Among other things, the IIAC argues that year end reporting will be preferred by investors; that it will make reporting more comparable; and, that it will lead to better quality reporting. It notes that dealers have been trying to accelerate their development and testing by six and a half months to implement the requirements at the start of 2016, instead of mid-2016, “but this is not possible in areas of ongoing uncertainty,” it says. “In rushing, decisions will be made based on expediency rather than on an optimal approach, compromising rigour in favour of rejigging older systems to meet the deadline.”

The letter stresses that the final requirements are not yet known in certain areas; it details the industry’s extensive efforts to implement CRM2; and, it describes the sorts of firms that could benefit from the extension. It also notes that, at the CSA’s prompting, the IIAC contacted other financial industry associations on this issue. It says that it had no feedback from exempt market associations, and that it understands that “other associations or their members may contact CSA members directly or as a group.”

“What is perhaps insufficiently well understood is that portfolio managers and fund managers, and their downstream (mutual fund dealer) clients to the end investors are, or may be, dependent on IIROC dealers for trade execution and information,” it notes. “We believe that these other parties would agree that calendar-year reporting is in the best interests of investors and would best meet investors’ informational/financial planning needs.”

Ultimately, the IIAC maintains that a delay in certain requirements are “appropriate and necessary adjustments to mitigate development risk. We also hope that the CSA will take this time to play an important role in educating the public and non-registrants that work supporting investors regarding CRM2.”

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