CIRO handled more complaints in the past year, but what about enforcements?

The past year has been an important one for Canada’s investment industry regulatory framework, which centred on the merger of IIROC and MFDA into the new SRO now known as CIRO.

This has surely created some challenges for investigations and enforcement as the merged entity harmonizes the styles and procedures of the heritage regulators. But the business of regulation has continued unabated.

CIRO’s latest enforcement report for 2022-2023 shows that complaints in fiscal year 2023 have risen for both investment dealers and mutual funds divisions, along with investigations.

“This past year, we pursued enforcement proceedings that addressed a wide range of conduct to prevent and deter misconduct, improve industry standards and strengthen market integrity,” said Elsa Renzella, CIRO’s senior vice-president, Enforcement and Registration. “We are also proud to release CIRO’s Guide to the Enforcement Process, which represents a tangible step forward in bringing together our two enforcement divisions while providing transparency into self-regulatory enforcement and our commitment to investor protection.”

There were 155 public complaints and 1306 via ComSet about investment dealers, up from 114 and 855 respectively in FY22. The overall total was 1563, way above the 1053 in FY22, 1396 in FY21, and 1283 in FY20.

Investigations completed increased to 91 (from 76 in FY22) with 41% where files were sent to Prosecutions. This was the same as in FY22.

For the mutual fund division, complaints totalled 2541, a surge from the 1635 of FY22, with public complaints up to 150 (from 99) and those through METS rising to 2382 from 1497.

Investigations completed in this division totalled 96, down from 133 in FY22 and the lowest over the last five years, while 46% were sent to Prosecutions, down from 53% in FY22 and again the lowest share in the last five years.

Enforcement action

For investment dealers, there were 23 proceedings commenced with completions for 20 individuals and 11 firms.

Among the top violations in completed proceedings were:

• Suitability/Due diligence/Handling of client accounts
• Misappropriation
• Discretionary trading
• Inappropriate personal financial dealings

Financial penalties and disgorgements totalled more than $1 million for firms and almost $15 million for individuals.

For mutual funds, there were 68 proceedings commenced with completions for 71 individuals and 6 firms.

Among the top violations in completed proceedings were:

• Pre-Signed Forms
• Active Signature Falsification
• Business Standards
• Personal Financial Dealings

Financial penalties and disgorgements totalled more than $1.3 million for firms and more than $8 million for individuals.

In total for 2022-2023, CIRO reviewed 4,104 complaints, conducted 187 investigations, completed 108 disciplinary proceedings, and imposed $25,140,343 in fines, costs and disgorgement.