Suspension, ban of members up to hearing panels: IIROC

The objective of IIROC’s change is to eliminate unnecessary rule provisions and redundancy in its rules, and to ensure the regulator’s provisions reflect its current practices.

Relevant history

In the process of responding to comments relating to proposed plain language rules 2100 through 2700 for dealer member organizations, IIROC revisited the necessity of proposed plain language rule sections 2210 and 2211.

That’s because prior to the establishment of IIROC, these IDA Rules set out the circumstances under which members could be suspended or terminated, and they no longer apply. Prior to 2004:

• IDA By-law 8.8 allowed the applicable District Council to suspend or terminate the membership of a Dealer Member that ceased to carry on the business of a securities dealer or that had been acquired by non-qualifying investors;

• IDA By-law 20.10 allowed the applicable District Council to suspend or terminate the membership of a Dealer Member as a disciplinary sanction;

• IDA By-law 20.30 allowed the applicable District Council to suspend the membership of a Dealer Member in the event the dealer’s registration had been suspended, cancelled or had lapsed, or in the event the dealer became bankrupt;

• IDA By-laws 20.31 and 20.32 allowed the applicable District Council to continue to suspend or to terminate the membership of a Dealer Member that did not adequately address the reason for the suspension issued pursuant to IDA By-law 20.30; and

• IDA By-law 20.33 allowed the Chair or Vice-Chair of the applicable District Council, in consultation with at least one member of the IDA Board of Directors, to suspend the membership of a Dealer Member and direct the Dealer Member to cease dealing with the investing public if, in their opinion, a Dealer Member Rule was breached and the rule breach was likely to result in losses to the investing public.

In 2004, however, IDA rules about hearing processes were “modernized to reflect administrative law principles, and to ensure processes that will permit the IDA to meet its member regulation mandate,” according to IDA proposals to amend By-law 20, published for public comment in November 7, 2003.

IIROC says one of the major amendments made at that time more clearly set out in the rules which matters District Councils would continue to have decision making authority over, and which matters must be decided upon by a hearing panel.

And as a result, IDA By-laws 20.10, and 20.30 through 20.33, were repealed and replaced with the following:

• IDA By-law 20.13 setting out the hearing panel as the decision maker for various hearings including disciplinary hearings, settlement hearings and expedited hearings (formerly suspension/termination hearings);

• IDA By-law 20.34 setting out the hearing panel’s power to suspend or terminate a Dealer Member as a disciplinary sanction;

• IDA By-law 20.42 setting out the circumstances under which an expedited hearing can be held in front of a hearing panel, including a dealer bankruptcy, suspension of a dealer registration, a suspension of a dealer marketplace membership and a dealer that poses an imminent harm to the public; and

• IDA By-law 20.45 setting out the hearing panel’s power to suspend or terminate a Dealer Member in one of the circumstances described in Dealer Member Rule 20.42.

Proposed change

IDA By-law 8.8 was not amended or repealed when IIROC was formed and hasn’t been since, meaning applicable District Councils are still able to suspend or terminate the membership of a dealer member under certain circumstances, despite the new rules about hearing panels.

As such, IIROC wants to exclude it and says, “A hearing panel should decide whether to suspend or terminate the membership of a dealer member in all circumstances.”

Read the full proposal.

The industry is invited to comment up until 60 days after the release of this notice.