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:
This week/ASAP: Contact Richard Corner, IIROC Vice-President and Chief Policy Advisor, at
416.943.6908 or rcorner@iiroc.ca to let him know if:
1. your firm intends to or may apply for an exemption
2. IF KNOWN, the approximate number and dollar client-name to total holdings –
Note that IIROC will be surveying for this purpose in March 2015, so the exact
data is not necessary at this point
IIROC would like a sense of how many firms will be applying to better standardize the
review process.
When ready:
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 annual fee/charge 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 IIROC Notices 14-0214 and 15-0013 (see Appendix 1 for extracts).

The client-name statement/book cost information requirements go into effect December 31, 2015
assuming the date change in the CSA’s January 28, 2015 letter is implemented. In general, firms are
interpreting that date to mean reporting for the quarter ending December 31, 2015, however, some
believe that relevant provisions apply for the period after that date. 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.

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
Mr. Richard J. Corner
Vice-President and Chief Policy Advisor, Member Regulation
Investment Industry Regulatory Organization of Canada (IIROC)
Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
Contact: (416) 943-6908/rcorner@iiroc.ca
Dear Mr. Corner:
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]
2|Page
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
3|Page
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,
4|Page
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
5|Page
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.
6|Page
APPENDIX 1
Extract from the January 19, 2015 IIROC Notice 15-0013 – Rules Notice – Notice of
Approval/Implementation – Client Relationship Model – Phase 2 Performance Reporting and Fee /
Charge Disclosure amendments to Dealer Member Rule 200 and to Dealer Member Form 1.
“As previously discussed in IIROC Rule Notice 14-0214, 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 off-book client positions, IIIROC 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
4
receiving off-book position information from their “dealer of record” . In considering each exemption
request, IIROC staff will need to be satisfied that the Dealer Member:
•
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;
•
is not promoting, or otherwise actively making available, the option of holding client-named
•
positions off-book ; and
does not receive any ongoing compensation on the off-book client named positions.
5
4
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.
5
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.
IIROC response to comments on September 18, 2014 IIROC Rule Amendment:
“In considering any exemption requests received IIROC will consider many factors, including investor
impact-focused factors. Specific to investor impacts, we will also consider:
• Whether investors were given a choice to switch their holdings to nominee-named holdings in order
to receive this information (Note: This can be referenced in section 3 of the table appended to the
draft exemption request].
• The type of information investors will not have access to if they continue to keep their holdings in
client name [Note: This also can be referenced in section 3 of the table appended to the draft
exemption request].
• Whether requiring the Dealer Member to build off-book client name reporting for their remaining
investors that keep their holdings in client name, would result in a significant increase in the Dealer
Member’s cost structure, which could impact the overall costs borne by all of the dealer’s clients.
[Note: Referenced in section 2 of the table appended to the draft exemption request].
Regarding the commenter suggestion that IIROC publish information regarding any exemption requests,
we can confirm that information relating to this type of exemptive relief will be published as part of the
annual exemptions notice published by IIROC.”
7|Page
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
8|Page
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)
9|Page
APPENDIX 3
SOURCE: