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CIRO to consult on whether Non-Tailored Advice can be provided in the Order Execution Only Channel

On December 13, 2024, the Canadian Investment Regulatory Organization (“CIRO”), published a request for comment (the “Bulletin”) on whether CIRO investment dealers offering order execution only account services (“OEO Dealers”) can provide non-tailored advice to Do-It-Yourself investors (“DYI Investors”).

Current Regime Limits DIY Investors Access to Regulated Advice

Existing guidance Guidance Note 3400-21-003 Guidance on order execution only account services and activities (the “OEO Guidance”) provide a regulatory framework for OEO Dealers, designed to ensure clients of OEO Dealers make independent decisions without recommendations or suitability assessments from an OEO Dealer (“Recommendation Prohibition”). The regulatory framework currently limit certain communications and tools managed by OEO Dealers that “pushed” information or have the potential to “influence” an investor. However, the Bulletin expressed that some dealers feel constrained by the current OEO Guidance and only a “limited extent” of the current tools permitted in the OEO Guidance are actually being implemented by OEO Dealers.

In an investor survey published by CIRO on June 4, 2024[1], CIRO highlighted there have been a significant growth in DYI Investors, with many investors likely to choose social media, internet forums or financial influencers as sources of investing information and advice. The Bulletin made specific reference to an OSC Business Plan from April 2024 which highlighted concerns that the current limitations in the OEO Guidance might push investors towards unregulated, potentially misleading sources, and restrict important warnings about products like leveraged products and meme stocks.

The Bulletin noted that a key focus for CIRO, as laid out in its strategic plan for 2025 to 2027[2], is to enable greater access to financial advice through policy change that meets the changing needs of the investor. This includes expanding advice options made available to investors across CIRO-regulated firms to offer “more cost-efficient, more scalable” advice, including hybrid and automated alternatives. CIRO’s strategic plan acknowledges that new advice alternative “may be less personalized than those historically provided” but could result in a greater number of investors having access to regulated advice to guide their financial decisions.

Based on the considerations contemplated above, the Bulletin expresses that CIRO is considering whether to allow CIRO OEO dealers to provide non-tailored advice to meet the needs of DIY investors. The objective of this proposed change will allow investors to receive access to “high-quality information from verified sources” and “[allow investors to use] tools designed to help [them] make better investment decisions”.

Proposed Solutions

The Bulletin proposes revising the OEO Guidance to clarify permissible alerts, educational information, and tools that OEO dealers can provide without breaching the Recommendation Prohibition. It suggests redefining the term "recommendation" to emphasize whether the advice is non-tailored and whether it is “intended to empower clients to make informed decisions independently.” Additionally, the Bulletin suggests new changes to OEO Guidance will also include new guidance addressing digital engagement practices and advocating against gamification and negative engagement tactics.

Consultation questions are currently available in the Bulletin, with responses due by February 26, 2025. Following this, CIRO plans to publish proposed revisions to the OEO Guidance.

 

[1] CIRO 2024 Investor Survey: https://www.ciro.ca/media/8526/download?inline

[2] CIRO Strategic Plan FY 2025-2027: https://www.ciro.ca/media/7981/download?inline

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