IIAC Information about and Considerations for Seeking
IIROC Off-Book/Client-Name Reporting Exemption
Exemption is not guaranteed
Process for Seeking Exemption
Firms intending to seek or considering an exemption from off-book/client-name reporting should:
Before June 30, 2015: Send your exemption request. You may save this document; delete this cover
memo and explanatory appendices; complete the attached letter, including by
replacing or deleting all yellow-highlighted text; and send the completed document.
Remember: it is critical that the document be tailored to your client profile and
business model.
General Background Information:

Exemption is an option to ensure that “the Report on client positions held outside of the Dealer
Member [and performance reports do] not result in Dealer Members having to build a new
capability to report on off-book positions to an immaterial number of clients and/or to report on an
immaterial dollar amount of off-book client positions. IIROC will consider exemption requests from
Dealer Members who can demonstrate that the costs of building and administrating this new client
reporting capability significantly outweigh the benefits to the client.” Exemption criteria can be
found in the April 22nd, 2015 IIROC Communication on Client Name Exemptions, as well as in IIROC
Notices 14-0214 and 15-0013 (see Appendix 1 for IIROC Communication).

The client-name statement/book cost information requirements go into effect December 31, 2015.
Annual client-name fee/charge and performance reports take effect July 15, 2016, meaning for
effect the 2016 calendar year or no later than for the year ending July 14, 2017.

The client-name exemption is based on IIROC’s normal exemption process under Rule 17.15:
“The Board of Directors may exempt a Dealer Member from the requirements of any
provision of the Rules where it is satisfied that to do so would not be prejudicial to the
interests of the Dealer Members, their clients or the public and in granting such exemption
the Board of Directors may impose such terms and conditions as are considered necessary.”

IIROC’s Board of Directors meets every two months and can approve exemptions at these meetings.
Firms should not wait until close to the deadline before applying for the exemption. The Board will
be meeting June 25th, 2015 and September 10, 2105 to review exemption requests.

Note that IIROC is expected to assign conditions to firms receiving exemptions that could include a
periodic review, and provide for dealers to be subject to IIROC action, up to exemption revocation.

Note: If your firm uses a carrying broker, please speak with the carrier as they may be able to assist
with the data and other aspects of the exemption application process.
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SAMPLE LETTER TO IIROC REQUESTING CLIENT-NAME REPORTING EXEMPTION
[Put on company letterhead]
[Insert date], 2015
IIROC General Counsel
Investment Industry Regulatory Organization of Canada (IIROC)
Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
Contact: (416) 943-6908/[email protected]
Dear Sirs/Mesdames:
Re: Request for Client-Name Reporting Exemption
[Further to our call of [insert date if applicable],I am writing on behalf of [firm name] to request IIROC
staff, under the provisions of IIROC Rule 17.15, to recommend to IIROC’s Board of Directors the
granting of an exemption to [firm name] from the following IIROC Rule subsections:
200.2(e) Report on client positions held outside of the Dealer Member
200.2(f) Performance report
200.2(g) Fee/charge report [Note: This is expected to be required for any accounts on which the
dealer requests to keep compensation]
subject to [firm name] adhering to the commitments in the attached [table/report].
[Firm name] is a [insert summary of firm size, business model, etc.]
[Note: Select and adapt the appropriate one of the following as required; approval of those fitting into
category 1 below are expected to have approval fast-tracked. With respect to categories 3 and 4, IIROC
staff have advised that a compensation report will likely be required, but not (i) book cost/off-book
account statements or (ii) annual performance reports].
1. With x% of our total client assets held in client name as shown in the attached, we hold less than 2%
of total client assets in client-name and are giving up all related compensation. OR
2. With x% of our total client assets held in client name as shown in the attached, we hold more than
2% of total client assets in client name, have the referenced plan and timeline to reduce client-name
holdings to below 2%, and are giving up all related compensation. OR
3. With x% of our total client assets held in client name as shown in the attached, we hold less than 2%
of total client assets in client name, and request that we be allowed to retain related compensation
in the following cases for reasons explained in the attached:
 Itemize… OR
4. With x% of our total client assets held in client name, we currently hold more than 2% of total client
assets in client-name, have a plan and timeline to reduce these holdings to below 2% and request
we be allowed to retain compensation in the following cases for reasons explained in the attached:
 Itemize…
Additional information can be found in the attached material. Please contact [me/other] for any other
information you require or to answer further questions you may have.
Yours sincerely, [include pertinent contact information]
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How [Firm Name] Meets the IIROC Criteria for Client-Name Exemption
IIROC Exemption Criteria
1. Dealer Member:
 has an immaterial
amount of off-book
accounts
[or]
 is in the process of
reducing active clientname holdings to an
immaterial amount
Evidence of Meeting Requirements for IIROC Purposes
Below is a summary of [firm name’s] client-name business, total business
and the percentage of client-name to total business
a. Off-book client-name
b. Total
a./b.%
# of clients or
positions
$ of holdings
2. Dealer Member can
demonstrate that the cost of
building and administering
the new client reporting
capability significantly
outweigh the benefits to the
client of also receiving offbook position information
from their “dealer of record”
Below is data regarding why the cost of implementing and administering
the necessary systems changes for the required quarterly statements and
annual reports would negatively affect current off-book clients of [firm
name] who we are not able to bring on-book to nominee holding basis
(see 3. below for our efforts to reduce client-name security holdings).
 Upfront cost estimates to meet quarterly statement with position
cost, and annual fee/charge and performance reports [Note that
project costs, before an indepth business analysis and specification
phase are ordinarily measured as some small amount less to 150 to
200% of the estimate]
 Ongoing cost estimates to meet quarterly statement with position
cost, and annual fee/charge and performance reports
 Source of cost estimates [service provider and/or vendor and/or inhouse build]
 Why off-book holdings cannot be brought on-book
 Operational/systems issues [e.g., current service provider/carrying
broker is not building to offer solution]
 Practical issues [e.g., Finance Canada estimated that there would
be only 180,000 RDSPs when set up so no likelihood of volume]
 Harm to client [cost, loss of flexibility of redeeming directly from
the fund company, client wants to keep business together]
 [Other]
[Considerations:
 Consider attaching documentation (data extract) of the percentage of retail
client securities held off-book expressed as a percentage of the total combined
dollar amount of on-book and off-book client holdings.
 Note that IIROC is circulating a client-name holdings survey to all members
with retail clients – firms may replace the above by summarizing or attaching
that data if available when submitting an exemption request.
 IIROC has referenced “immaterial” as being less than 2% of the total ($)
amount of on- and off-book holdings. Member firms with client-name
securities holding percentages above, say, 2% should document and
summarize a plan with a timeline for bringing the securities of these clients onbook to reduce client-name holdings below 2%.
 Expect that IIROC will want verification of the off-book client-named securities
holdings percentage your firm currently holds. For independent confirmation,
FundSERV staff advised they could provide an annual report of a dealer’s
holdings that could be compared to data submitted to IIROC for its Client Net
Equity Report – while not complete, this was seen as a good proxy for the total
retail off-book fund universe. A number of members have advised that they
are not sure this report will be able to be easily completed or interpreted.]
[Considerations:
 Consider showing costs on a per-client basis compared to what the client is
currently paying [e.g., assuming dealer/advisor ongoing service commission
to off-book securities holders, with an average MER of 2%, of which 1% is
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IIROC Exemption Criteria
Evidence of Meeting Requirements for IIROC Purposes


3. Dealer Member has made
good faith efforts to convert
off-book client named
positions into on-book
nominee name positions.
earned by the dealer/advisor, the average client is paying [.01 x average
holding] per year for the client-name fund dealer/advisor infrastructure; the
costs to deliver the new report represent a potential cost increase of x per
account. The 2010 OSC-commissioned Report: Performance Reporting and
Cost Disclosure, Prepared for: Canadian Securities Administrators, Dr. Edwin
L. Weinstein (September 17, 2010), states that: “More than half of those
wanting more detailed information are willing to pay for it. Two‐thirds of
those willing to pay for more detailed information would not pay more than
$50, in fact, most would pay $25 or less.”
Consider noting in communications to off-book clients under 3. below the
benefits that any client that chooses not to change his or her arrangements
after the options are presented will not have access to and how the client can
get or replicate these benefits., e.g., the average client has less than [x – or
use the industry average which is between 2 and 3] positions and can obtain
the equivalent using manual means or easily available software (mutual fund
switch fees discourage frequent purchases and redemptions because:
 The fund manager provides the equivalent of a statement.
 Annual compensation reports can be calculated manually or using widely
available software and Fund Facts.
 If there are no transactions, the client can obtain performance
information from the fund company; if there are transactions, there are
free online calculators, such as
http://www.weighhouse.com/resources/portfolio_return.aspx;
http://www.pine-grove.com/online-calculators/irr-calculator.htm;
indicate if there are any links to free ones from your firm’s website].
Consider noting that while the implementation costs per client would be
reduced on a percentage basis by spreading them over your firm’s full client
base, it is patently unfair to do so in this instance when client-name clients
have been given alternatives that are just and reasonable and [if applicable,
our firm has experienced operational losses over the past x years]
Below are details of [firm name’s] efforts to date with respect to
reducing, and preventing an increase in, client-name holdings:
 Efforts to reduce client-name holdings in the past and results
 Efforts to contact clients to move them on-book since CRM2 start
 Plan to:
 Further reduce off-book holdings going forward, including
advising client-name holders that they would not receive
contemplated quarterly additional statement and annual
fee/charge and performance reports
 Prevent the receipt of additional off-book positions
 Explanation of why certain off-book client name positions may not be
able to become client-name nominee positions [complexity, very few
accounts, low maximums, etc.]
 Efforts to have fund managers remove [firm name] as dealer of
record
 [Other]
[Considerations:
 Members should elaborate on as many of the above as possible, deleting any
that do not apply and, optionally, inserting or attaching a version of
Appendix 2.
 Members should identify types/categories of accounts (see Appendix 3,
which is provided for account category references only, providing a summary
provided by largest independent fund managers of the categories and
thresholds currently held) that will have to remain off-book where there are
operational and/or client harm reasons they cannot be brought on-book,
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IIROC Exemption Criteria
Evidence of Meeting Requirements for IIROC Purposes


4. Dealer Member is not
promoting, or otherwise
actively making available,
the option of holding client
name positions off-book
e.g., RDSPs, group RRSPs, RESPs or at least provincial varieties of RESPs
where firms, or their service providers/carrying brokers/vendors, do not have
the capability to hold the position on-book.
Members have noted that there is understood to be no systems-based way to
prevent receipt of an advisor-initiated transfer in of a client-name position
from one to another dealer of record.
For a sample letter to clients to bring assets on book, refer to Advisor Tip
Sheet #8: Bringing Client-Name Accounts on Book).
[[Firm name] never had/has reviewed and removed or replaced] any
material promoting, or otherwise appearing to actively make available,
the option to hold client-name positions off-book. Below is the following
supporting material:
 Summary of [firm name’s] nominee-only holding policy as
[provided/to be provided] to IAs
 Description of procedures to convert to nominee positions any
acquired when a new advisor is being on-boarded with client-name
positions
 Summary of what information has been/will be added to [firm
name’s] website to support our intent to deal only on a nominee
basis.
 [Other]
[Considerations:
 Add to or delete from the list above.]
5. Dealer Member does not
receive any ongoing
compensation on the offbook client-named positions
[Firm name] received [$x] in ongoing trailer compensation on client-name
positions [last year/over the past 12 months]. Below are the steps [firm
name] will use to cease to accept any ongoing compensation.
 Switch clients to ‘F’ series where the option exists
 Ask fund managers to suppress trailers or rebate it to clients
 Ask fund managers to change their prospectuses to permit the
reinvestment of trailers in the related funds
 Contribute any trailers that have not been avoided, suppressed or
reinvested to a registered charity [enter, if known, or say based on
your current community/charitable giving practices/etc.]
 [Other]
[Considerations:
 Add to or delete from the list above.
 Some fund managers have provisions in their prospectuses that prohibit
receiving back trailers.
 Dealer Members are not to benefit from the compensation and there is a
variety of potential options – contributions to regulator investor education
initiatives, rebate to the client.
 List what your firm intends to present to demonstrate compliance for each
method you use to cease receipt of trailers (letters, cheque copies, advices of
payment, charitable donation receipt).
 Note that the IIAC has heard that certain parties have complained about the
tax deduction that would accrue to the dealer. Note that part of the trailer
that dealers are giving up contributes to basic dealer infrastructure (including
regulatory compliance) and therefore any charitable donation “tax benefit”
appropriately remains with the IIROC dealer/client base)].
6. Request for exception to
receive ongoing
compensation on the noted
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Applying for an Exception within the Exemption
[Firm name] would like to continuing receiving compensation for the
following account types for clients, conditional on not actively promoting
these accounts:
IIROC Exemption Criteria
off-book client-named
positions
Evidence of Meeting Requirements for IIROC Purposes
 [insert account types]
 [explain rationale]
 [insert account types]
 [insert account types]
[Considerations:
 Dealer Members can apply for the exemption and request an exception from
Criteria 5 regarding compensation.
 If a Dealer Member requests an exception, it must provide a business case(s)
for the types of client-name accounts it wishes to continue receiving
compensation for (cross-reference section 2 if appropriate).
 Note that if any exception is provided, there may be conditions placed on the
exemption that could include providing the client with compensation
reporting.
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APPENDIX 1
April 22, 2015
IIROC staff communication to Dealer Members that are considering filing an
application to be exempted from the new requirement to provide clients
with a quarterly “Report on client positions held outside of the Dealer
Member”
On March 6, 2015 a survey was sent to all IIROC Dealer Members asking them
whether they intended to file an application to be exempted from the new
requirement to provide clients with a quarterly “Report on client
positions held outside of the Dealer Member” and, if so, asking them for
information on their current levels of off-book client holdings. The
responses we’ve received to this survey indicate that:

Approximately 50 Dealer Members intend on filing an exemption
application; and

Approximately 86% of those Dealer Members have already reduced their
client off-book holdings to 2% or less of their total on-book and
off-book client holdings
The remainder of this communication sets out the process IIROC staff
intend to follow in reviewing any applications we receive for a Dealer
Member to be exempted from the new requirement to provide clients with a
quarterly report on client positions held outside of the Dealer Member.
RATIONALE FOR IIROC CONSIDERING EXEMPTION REQUESTS RELATING TO OFF-BOOK REPORTING
To ensure that the introduction of the new report on client positions held
outside of the Dealer Member does not result in Dealer Members having to
build a new capability to report on off-book positions to an immaterial
number of clients and/or to report on an immaterial dollar amount of offbook client positions, IIROC will consider exemption requests from Dealer
Members who can demonstrate that the costs of building and administering
this new client reporting capability significantly outweigh the benefits
to the client of also receiving off-book position information from their
“dealer of record”1. In considering each exemption request, IIROC will
need to be satisfied that the Dealer Member meets a number of “general
exemption conditions”. These general exemption conditions are that the
Dealer Member:
1

has made a good faith effort to convert off-book client name
positions into on-book nominee name positions;

does not maintain material number or amount of off-book client named
positions;
In the case of off-book client named mutual fund positions, clients
already receive annual position information from the investment fund
manager for the mutual fund.
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
is not promoting, or otherwise actively making available, the option
of holding client-named positions off-book2; and

does not receive any ongoing compensation on the off-book client
named positions.
PROCESS FOR IIROC CONSIDERING EXEMPTION REQUESTS RELATING TO OFF-BOOK REPORTING AND TIMING
OF BOARD MEETINGS
As is the case with any other request submitted to IIROC to be exempted
from one or more IIROC Dealer Member Rule requirement, all requests to be
exempted from the new off-book reporting requirements must be considered
and decided upon by the IIROC Board of Directors pursuant to IIROC Dealer
Member Rule section 17.15 which reads as follows:
“17.15
The Board of Directors may exempt a Dealer Member from
the requirements of any provision of the Rules where
it is satisfied that to do so would not be prejudicial
to the interests of the Dealer Members, their clients
or the public and in granting such exemption the Board
of Directors may impose such terms and conditions as
are considered necessary.”
To assist in the timely Board of Directors consideration of each exemption
request, IIROC staff will review each exemption request submitted to
determine whether in their view the request has merit and sufficient
information has been included in support of the request. Where IIROC
staff have concerns about the merit of the request and/or the sufficiency
of the information the Dealer Member has provided in support of the
request, the Dealer Member will be contacted and asked to provide further
analysis/information in support of their request.
In due course, each exemption request received by IIROC will be forwarded
by IIROC staff (along with an IIROC staff recommendation) to the Board of
Directors for their consideration. It is therefore very important that
any Dealer Member request to be exempted from one or more IIROC Dealer
Member Rule requirement includes sufficient analysis and supporting
information in order to avoid delays in the Board of Directors considering
the request and in order to ensure that the Board of Directors have
sufficient information to make an informed decision on the request. In
order to ensure that any request to be exempted from the new off-book
reporting requirements is as complete as possible, it is suggested that
any exemption request submitted include:

2
For each of the general exemption conditions listed above that is
currently being complied with for all business lines that involve
off-book client holdings, a detailed analysis (along with supporting
information) explaining how compliance is being achieved and a
discussion of how ongoing compliance will be maintained
Exceptions will be made under certain circumstances for certain accounts
such as Registered Education Savings Plans (RESPs) and Registered
Disability Savings Plans (RDSPs) where some client positions may only be
held in client name.
8|Page

For each of the general exemption conditions listed above that is
currently not being complied with for one or more business lines
that involve off-book holdings, either:
o a detailed plan (along with supporting information) explaining
how the condition will be met by June 30, 2016 for all
business lines that involve off-book client holdings and a
discussion of how ongoing compliance will be maintained; or
o a detailed analysis (along with supporting information)
explaining why for certain business lines that involve offbook holdings there are operational and / or client harm
reasons why compliance with the condition would not be in the
public interest
Meetings of the IIROC Board of Directors are held six times per year. In
order for any exemption requests we receive to be dealt with on a timely
basis, it is our intention that all exemption applications will be
considered by the Board at either its June 25, 2015 or September 10, 2015
meeting. As IIROC staff need time to review each exemption application
before it can be forwarded along to the Board (along with an IIROC staff
recommendation) for consideration, it is essential that exemption requests
be as complete as possible and be submitted to IIROC on a timely basis.
As it is our intention that last exemptions applications will be
considered by the Board at its September 10, 2015 meeting, we would
appreciate receiving all applications to be exempted from the new off-book
assets reporting obligation as soon as possible but no later than June 30,
2015.
SPECIFIC RULE PROVISIONS FOR WHICH EXEMPTION REQUESTS WILL BE CONSIDERED
It is the IIROC’s position that requests submitted to IIROC to be exempted
from the new off-book reporting requirements should be limited to:

The new requirement to provide clients with a quarterly “Report on
client positions held outside of the Dealer Member” set out in
Dealer Member Rule sub-section 200.2(e); and

The new requirement to consider off-book client-named holdings in
the preparation of the client’s performance report as mandated under
Dealer Member Rule sub-section 200.2(f).
IIROC will not consider exemption requests from the new requirement to
consider off-book client-named holdings in the preparation of the client’s
fee / charge report as mandated under Dealer Member Rule sub-section
200.2(g) as:

If the Dealer Member receives an exemption from the requirement to
provide clients with a quarterly “Report on client positions held
outside of the Dealer Member” and does not take compensation on any
off-book positions, there will be nothing to report in the annual
fee / charge report with respect to off-book positions; or

If the Dealer Member receives an exemption from the requirement to
provide clients with a quarterly “Report on client positions held
outside of the Dealer Member” and does take compensation on one or
more off-book positions, there is no policy reason why this
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compensation should not be included in the annual fee / charge
report
INTENDED PROCESS TO BE FOLLOWED BY IIROC STAFF IN THE REVIEW OF EXEMPTION REQUESTS
RECEIVED
Expedited review and exemption request consideration process
Dealer Members meeting all of the above general exemption conditions will
be subject to an expedited IIROC staff assessment process. Under the
expedited process, the bulk of the IIROC staff assessment will be focused
on ensuring that the applicant’s statistics evidencing that their
cumulative off-book client named positions represent an immaterial portion
of their overall total client assets3 have been independently verified.
To assist in the IIROC staff assessment work, the exemption request should
contain sufficient supporting information to demonstrate the all general
exemption conditions are being complied with. For example, in the case of
the condition that a Dealer Member “does not maintain material number or
amount of off-book client named positions”, it is expected that not only
that the Dealer Member report that their off-book client named positions
(as a percentage of their overall total client assets) is at or below 2%
but also that the Dealer Member provides sufficient independently
verifiable information to support the calculated percentage reported and
the numerator and denominator amounts4 used in the percentage calculation.
It is anticipated that once staff have completed their analysis that the
applicant will be informed that:

IIROC staff have determined that the application satisfies the
general exemption conditions and will recommend the approval of the
exemption application at the next meeting of the IIROC Board of
Directors as an “expedited” exemption;
OR

IIROC staff have determined that the application does not satisfy
all of the general exemption conditions and will recommend that:
o
Where applicable, undertakings be included in the draft Dealer
Member exemption order that are designed to achieve compliance
with all of the exemption criteria within a reasonable period
of time (i.e., 12 months) and, subject to the inclusion of
these conditions, the Dealer Member pursue a standard
exemption application (see “standard process” below);
AND/OR
3
4
For the purposes of this assessment, IIROC staff would consider the level
of off-book client named positions to be immaterial where the dollar
amount of off-book client named positions represents 2% or less of the
dollar amount of the Dealer Member’s total on-book and off-book client
assets.
The numerator used in the percentage calculated would be the total dollar
value of off-book client assets and the denominator used in the percentage
calculated would be the combined total dollar value of on-book and offbook client assets.
10 | P a g e
o
Where the Dealer Member wishes to continue to receive some
form of ongoing compensation on for certain product/account
offerings, the Dealer Member pursue a standard exemption
application (see “standard process” below);
OR
o
Where IIROC staff determine that there is material noncompliance with one or more of the general exemption criteria,
the Dealer Member exemption request not be pursued5.
Standard review and exemption request consideration process
Dealer Members who do not meet all of the general exemption criteria will
be subject to the standard IIROC staff assessment process for exemption
recommendation to the Board. The most likely situations where a Dealer
Member does not meet all of the general exemption conditions will be:
(a) A Dealer Member meets all of the criteria with the exception that
their off-book client named positions as a percentage of their
overall total client assets is above 2%, but they have plans to
reduce that percentage to a level that is at or below 2%;
OR
(b) A Dealer Member meets all of the criteria with the exception of
certain off-book “account” arrangements (RESPs, RDSPs, group
pension plan accounts, etc.) on which they wish to continue to
receive compensation;
OR
(c) A Dealer Member meets all of the criteria with the exceptions
listed in (a) and (b) above.
Dealer Member exemption requirements met with the exception that their
client-named holdings percentage is greater than 2%
In the case of situation (a), each firm will need to outline in detail, as
part of their exemption application, their plans to reduce and, once
reduced, maintain their off-book client holdings percentage to/at a level
that is at or below 2%. To assess whether these plans have a significant
likelihood of success within a reasonable time, IIROC will consider:

The scope of the work - The scope of the work required by the Dealer
Member in order to reduce their off-book client holdings percentage
to a level that is at or below 2%. This scope of work assessment
will consider:
o
5
The current number and percentage (expressed as a percentage
of the total number of clients) of clients with one or more
off-book client named positions
In this instance, the exemption application will not be supported by IIROC
staff, due to material non-compliance with the general exemption
conditions
11 | P a g e
o
The current dollar amount and percentage (expressed as a
percentage of the dollar amount of the Dealer Member’s total
client assets) of off-book client named positions
To assist in this IIROC staff assessment it would also be helpful if
the above statistical information could be segmented by the
applicant, based on the following categories of clients:
o
Clients with which the Dealer Member has lost contact and for
which the firm has no current contact information
o
Clients for which the Dealer Member has current contact
information and who’s only relationship with the Dealer Member
is through the holding of off-book client-named holdings
transacted through the Dealer Member
o
Clients for which the Dealer Member has current contact
information and who have one or more account relationships
with the Dealer Member
Specifically, the provision of segmented off-book client-named
position information could potentially provide IIROC staff with
greater comfort that the Dealer Member’s plans to reduce its offbook client named holdings percentage to 2% or lower is achievable.

The planned resources to be used to perform the work - The planned
amount of resources (estimated number of full time employees and
work hours and cost) the Dealer Member intends to devote to reducing
their current off-book client holdings percentage and whether these
resources are adequate to reduce its off-book client named holdings
percentage to 2% or lower within a reasonable period of time (i.e.,
by end of 2015).
Dealer Member exemption requirements met with the exception of certain
off-book “account” arrangements for which they wish to continue to receive
compensation
In the case of situation (b) where a firm proposes to continue to receive
compensation for certain off-book “account” arrangements, a business case
must be provided to justify the ongoing receipt of compensation for each
of these arrangements. The business case must:

Explain why switching client holdings from off-book client-named to
on-book nominee-named holdings under these specific arrangements
cannot be done operationally or is not practical;
AND/OR

Explain the client harm(s) that would result to the client if they
switched their holdings from off-book client-named to on-book
nominee-named holdings.
If for a particular off-book “account” arrangement there are no
operational, practical or client harm impediments to switching holdings
from off-book client-named to on-book nominee-named holdings, there would
likely be no business case made for the firm to continue to permit the
holding of these positions off-book or to be exempt from reporting on
these off-book assets.
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Where an exception is granted to permit a firm to continue to receive
compensation for one or more off-book “account” arrangements, the
compensation received by the firm under these arrangements must be
included in the annual fee/charge report provided to the client. A
similar requirement to mandate that the assets held under these
arrangements be considered in the preparation of the annual performance
report provided to the client is not being considered at this time. The
requirement that the compensation received by the firm under these
arrangements must be included in the annual fee/charge report provided to
the client will be included as a condition in any exemption order approved
for the Dealer Member.
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APPENDIX 2
OFF-BOOK/CLIENT-NAME HOLDING WORKSHEET
Note: The following table can help IIAC members prepare/explain efforts to bring clients into on-book nominee
options. The IIAC has been advised that there are no regulatory requirements that would prevent fund managers
from removing dealers/advisors as dealer/advisor of record for fear the fund managers would be forced to
assume responsibility for “know-your-client” and suitability requirements. The IIAC will raise opportunities with
IFIC, at least in the case of off-book clients for whom there is no current contact information.
Type
# of clients/accounts # of positions $ of holdings
ACTIVE ACCOUNT/HOLDINGS –Transactions in account or advisor/client contact or mail not returned
Client not yet contacted
Advisor in discussion
Subtotal possible conversions
Refuse to change – Client asked to convert; formal or assumed refusal documented
Refuses to/does not reply – credit transactions
Client asked to convert; no response – some
transactions (e.g., automatic credits,
contributions) – does documentation permit
cessation/non-acceptance of additions? Block
contributions or transfers in?
Refuses to/does not reply – debit transactions
Client asked to convert; no response – some
automatic debits); is account RRIF and being
wound down? Is it possible to block
contributions or transfers in?
Refuse to/does not reply – debit and credit
transactions
Refuses to/does not reply – no transactions
No client transactions (are amounts small
enough to return to client? Do account
agreements permit returning to client?)
Subtotal non-responsive active holdings
“Specialty accounts/holdings” –
Off-book account types that cannot reasonably be
brought on-book or transferred (e.g., RDSPs, Group
RRSPs, province-specific registered plans, RESPs,)
Subtotal all active holdings
OTHER
Dealer of record but don’t know how or why –
possible error; check with fund manager
“Address unknown” –
mail returned addressee unknown; determine if
fund manager will remove dealer as dealer of
record
Subtotal inaccessible clients
TOTAL ALL ACTIVE AND INACTIVE HOLDINGS
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IIROC Client Name Statistics
SOURCE:
FundCos
Number of Client Name Accounts held by the Top Ten Dealers at Seven Independent Fundcos
Investment/Open
Total (#)
% of Total
RRIF/LIF/LRIF
54,374
22.5%
13,791
5.7%
RRSP/LIRA
104,193
43.1%
Groups/
DPSP/
Pensions
17,610
7.3%
TFSA
3632
1.5%
RESP
47,006
19.5%
RDSP
977
0.4%
Total
Number
Accounts
at Top 10
Dealers
Total ALL
active
client
name
accounts
held by All
IIROC
Dealers
(not fund
positions)
From 7
Fundcos as a
% of
accounts per
Investor
economics
241,583
100.0%
270,303
89.4%
2.5%
ALL IIAC
(comparisons are
thus understated)
AUM ($) of Client Name Accounts held by the Top Ten Dealers
Investment
Total ($mms)
RRSP/LIRA
RRIF/LIF/LRIF
Groups/
DPSP/
Pensions
TFSA
RESP
RDSP
Total
AUM at
Top 10
Dealers
Total ALL
assets held
active
client
name
accounts
held by All
IIROC
Dealers
Total Net
Client Equity
(per IIROC)
($millions)
Total
Integrated
Assets
($millions)
Total
Retail
Assets
($millions)
100%
80%
20%
$1,452
$2,566
$432
$286
$74
$882
$16
$5,707
$6,087
$1,300,000
$1,040,000
260,000
25.4%
45.0%
7.6%
5.0%
1.3%
15.5%
0.3%
100.0%
94%
0.3%
0.4%
1.5%
94% of
$6,087
IIROC
MFR Date
Peer Group Name
5/31/2014
Integrated
5/31/2014
Non-Integrated
S10-1a. Client Net
Equity - Total (000s)
Note: IE retail estimate = $1.3 trillion
S10-1a. Client Net
Equity - Total (%)
$1,659,511,056
80%
$416,706,785
20%
$2,076,217,841
100%
List of IIROC Dealer Members by Peer Group (http://www.iiroc.ca/industry/industrycompliance/Documents/PeerGroupList_en.pdf)
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APPENDIX 3
SOURCE: