What Are Universal Market Integrity Rules (UMIR)?
Let me explain to you what Universal Market Integrity Rules (UMIR) are. These are a set of rules that govern trading practices in Canada, established by an independent regulator called the Investment Industry Regulatory Organization of Canada (IIROC). UMIR exist to promote fair, equitable, and efficient markets. Before UMIR came along, each exchange handled its own trading rules, but now these practices are universal across Canadian exchanges, ensuring equal fairness and boosting investor confidence everywhere.
Understanding Universal Market Integrity Rules (UMIR)
You need to know that IIROC determines the UMIR. As a national self-regulatory organization, IIROC oversees all investment dealers and trading on debt and equity marketplaces in Canada. They write rules like UMIR to set high regulatory and investment industry standards. IIROC also screens investment advisors at regulated firms, reviews firms' financial compliance, and sets minimum capital requirements to ensure firms have enough capital for operations. This kind of oversight cuts down on bankruptcies caused by excessive leverage or risky practices.
IIROC Compliance Reviews
IIROC carries out compliance reviews to verify that firms properly supervise client accounts and that advice and transactions match the client's needs and instructions. Advisors approved by IIROC must adhere to suitability and 'know your client' rules, meaning they have to be familiar with a client's financial situation, investment needs, objectives, experience, and risk tolerance. Additionally, IIROC performs trading conduct compliance reviews to examine firms' trade-desk procedures, assessing if they comply with UMIR and provincial securities laws.
IIROC Market Surveillance
IIROC surveys the market and analyzes trading to make sure it complies with UMIR and provincial securities laws. They identify misconduct by dealers, firms, approved persons, and other participants, and they bring disciplinary proceedings, which can include fines, suspensions, permanent bans, or terminations for individuals and firms. The funds from these fines and settlements go into IIROC’s restricted fund, used for capital expenditures on regulatory issues, investor and industry education, and other authorized purposes under IIROC’s Recognition Orders.
According to the Canadian Securities Exchange (CSE), traders who are members with a good track record with IIROC and registered with a Canadian securities regulatory authority can apply for access to trade on the CSE.
IIROC amends UMIR rules from time to time. For instance, in 2015, IIROC proposed amendments following a Canada Securities Administrator (CSA) proposal to clarify what counts as a protected order. The CSA suggested that orders with a systematic order processing delay, or a 'speed bump,' would not be considered protected orders.
