‘Twas the month before 2015, when all through the industry…

CRM2 Hotspots …

… And how

to address them

Agenda

• Welcome

• Santa’s list…

• 2014 – leftovers

• Update – rules, FAQs, timing

• Naughty, not nice…

• 2015 – position cost, market value, statement notices, client name,

• 2016 – performance, compensation, confirmations

• Wrap-up

2

Santa’s list…

3

2014 “Leftovers”

• Account transfers

• Frequent traders

• Non-securities

• Deferred sales charges (DSCs)

• New issue fees

4

Update • IIROC Rules

• IIROC FAQs

• CSA Announcement

• CSA FAQs? Rules?

• CSA decision on re-alignment of rules

5

Naughty, not nice…

6

Focus 2015: Market Value

7

Key Issues

1. One or two values per security? 2. “Last traded price” results in values same as bid and ask? 3. Market value policy? 4. Definition of stale-dated? 5. Market value of debt? 6. Valuation by estimating? 7. Valuation as nil? 8. Classification as non-determinable (ND)? 9. Valuation of distressed securities “in play”? 10. Increasing comparability of market valuations? 11. Concern if “too many” securities identified with ND? 12. How to show NDs, estimates and nil on statements? 13. Date market values will be “ready” and implications?

Focus 2015: Position Cost Information

8

Key Issues

1. Will book cost be choice of all IIROC dealers?

2. What is final book cost definition?

3. Will book cost be used across industry segments?

4. Accept transfer in of book value? Between accounts?

5. Market value, $0, or ‘not determinable’ (IIROC Rule 200.1.b.(iii)) as only book cost alternatives?

6. Inception date for book value reporting?

7. Overwrite book cost with market value at July 15, 2015?

8. Risk of client using book cost for tax purposes?

9. Other concerns re use of book cost (CRA, RQ, CPA)?

Focus 2015: Client Name

9

Key Issues

1. How to report off-book if required or wanting to?

2. Will amended (September 18) rule be finalized in substantially the same form, allowing exemption?

3. Is there a template for seeking exemption?

4. When will dealers be able to seek exemption?

5. Ongoing tracking requirements?

6. How can firms return trailers on client-name accounts exempted from reporting?

7. Options for bringing client-name accounts on-book?

Focus 2015: Other

10

Key Issues

1. Ability to insert all required notices? i. definition of book cost or original cost ii. investor protection coverage, if any iii. where security may be subject to DSC iv. if no active market, market value is estimated/can’t be

provided v. if market value has been used as cost

2. Ability to meet timeline?

3. Source of DSC data? Leveraged, inverse, derivatives?

4. Is DSC comparable between in-branch and dealer fund sales?

5. Disclosure of holding type? nominee, certificate, client-name

Focus 2016: Performance Statement

11

Key Issues

1. Date for “since inception”?

2. Inclusion of all assets reported on statements?

3. Dealing with ND values?

4. Confirming a MWRR formula?

5. Ability to change to calendar-year report after a July 15, 2016-July 14, 2017 start?

6. Account transfer/rollover impacts?

7. MWRR or MWRR and TWRR?

8. Statement design?

9. Client account consolidation? Householding?

Focus 2016: Compensation Statement

12

Key Issues

1. Date of report? ability to change to calendar-year report after a July 15, 2016-July 14, 2017 start?

2. Is compensation consistent with what is reported to clients on statements? Are all forms of compensation captured? i. GICs, PPNs, seg funds, ii. Client name? iii. New issues? iv. Referrals?

3. Other products with DSCs/equivalents? ETFs, structured products,

4. Statement design?

5. Client account consolidation? Householding?

Focus 2016: Other

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Key Issues

1. Need/value of extension? 2. Provide views directly to commissioners? 3. Divisions among industry segments?

General Shared Concerns

1. Final rules… 2. Data quality 3. July 15 date and period consistency among competitors 4. POS3, MF risk ratings, CRM3... (embedded fees, fiduciary standard) 5. Time ticking away…

General Comments

1. Document rationale for decisions 2. Build in flexibility if possible, affordable

And more to come…

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• IIAC weekly newsletter: has submissions, new committees

• CRM2 Newsletter: short, plain language information for IAs

• CRM2 Updates: Monthly call or e-mail

• Annual Fee Report

• Annual Performance Report

PLEASE Complete survey on CRM2 Implementation Readiness

Thanks very much for your support

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…And Happy Holidays