Report explores whether certain regulatory processes are effective, efficient, fairly applied
The Canadian Securities Administrators released on June 25 its Oversight Review Report of the Investment Industry Regulatory Organization of Canada, which sought to determine whether the IIROC complied with the terms and conditions of its recognition orders.
The CSA’s staff conducted the annual risk-based oversight review, which explored whether specific processes within the IIROC’s equity market surveillance and debt market surveillance functions were effective, efficient and consistently and fairly applied, said a news release.
The review’s focus on equity market surveillance covered the processes for developing, regularly assessing and updating equity market surveillance alerts so that they align with prevailing market conditions; the equity market surveillance policies and procedures manual; and the adequacy of the market wide circuit breaker process.
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With respect to debt market surveillance, the CSA’s staff reviewed the processes for developing, reviewing and updating debt market surveillance alerts; the data integrity assurance processes and procedures seeking to ensure accuracy and consistency of the reported debt transaction data; and the debt market surveillance policies and procedures manual.
The CSA’s staff, who said they were satisfied that the IIROC has implemented sufficient processes and procedures in the identified areas, made one low-priority finding about certain IIROC processes and procedures which were not integrated into the equity and debt market surveillance policies and procedures manuals.
The IIROC acknowledged this, amended the manuals to reflect this finding and amended its procedures so that they would include the requirement to conduct regular alert review meetings for discussing relevant trends and patterns and for tackling potential changes to existing alerts and the development of new alerts, as well as the requirement for keeping minutes of such meetings.
The CSA’s staff noted that the IIROC made recent improvements to the market wide circuit breaker process and is assessing the necessity for additional changes, such as the automation of the process. The CSA said that it would continue keeping track of the IIROC’s progress and would follow up regarding possible enhancements to the market wide circuit breaker process.
The report explained that the key processes and procedures relating to the regulatory functions of equity and debt market surveillance should be properly documented to promote the efficiency of these functions and to ensure staff training, succession planning and business continuity. Without such documentation, the surveillance staff’s decisions may be misaligned, the report said.
