IIROC today issued two final guidance notes, one to clarify the requirements of member-dealer firms who engage in outsourcing arrangements, and another with specific focus on one form of outsourcing–clearing arrangements.
Guidance on outsourcing helps IIROC member-dealers understand their obligations so they manage the associated risks, and also ensures consistency among firms with guidelines from other regulators.
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In addition, the guidance identifies the business activities that may be outsourced and the functions that may not be outsourced, and sets IIROC expectations for appropriate due diligence procedures.
Interest by firms in contracting business functions, activities and processes to third-party service providers is growing amid increasing competitive pressures.
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“We want to ensure we strike the right balance between requiring the appropriate protections while reflecting the business realities that prompt firms to outsource functions,” says Rosemary Chan, IIROC senior vice president, Member Compliance, General Counsel and Corporate Secretary.
Clearing arrangements, in which back-office services are outsourced from dealers to other dealers, are primarily for the purpose of clearing and settling trades.
Draft guidance on clearing arrangements was issued for public comment in October 2012, and the final notice takes into account responses from stakeholders.