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IIROC proposes changes to in-house trading rules

Securities regulators are proposing changes to the rules around how dealers determine which trading activity requires oversight to guard against insider trading, front running and other conflicts of interest.

The Investment Industry Regulatory Organization of Canada (IIROC) is proposing rule amendments and new guidance that sets out how dealers define the trading activity by employees, reps and affiliates who may have access to inside information.

IIROC is proposing a principles-based approach that would enable dealers to determine who has access to confidential information within their particular firm based on the firm’s structures, its internal controls and policies.

“We have adopted a principles-based approach to provide [dealers] with greater flexibility to identify which accounts fall within the ‘dealer related person account’ definition,” IIROC says in its proposed guidance.

The proposals, which aim to harmonize terminology used in the trading rules and the dealer rules, would also redefine firms’ proprietary trading accounts as “dealer member accounts.”

If the proposals are adopted, IIROC indicates the biggest impacts will be changing how dealers identify in-house accounts, along with possible systems and operational changes that will be required. These include revisions to account documentation and order routing arrangements.

The proposals are out for comment until Dec. 4.

Source: Investment Executive