Best-interest dissenter reports compliance deficiencies

Best-interest dissenter reports compliance deficiencies

Best-interest dissenter reports compliance deficiencies In a recent bulletin, the CSA announced that four provincial regulators had walked away from years-long talks on a best-interest standard to protect public investors. While the dissenting provinces gave reasons to explain their move, one might actually need tighter regulation within its jurisdiction.

The Alberta Securities Commission (ASC) recently completed a round of compliance reviews to determine if registrants were following securities laws within the province, according to the Financial Post. The sweep covered a broad range of topics including compliance, know-your-client, sales practice and marketing, and conflicts of interest, among others.

In a review of 66 Alberta-listed exempt market dealers, staff at the regulator had reportedly “identified deficiencies in compliance with regulatory obligations in all areas tested.” The 39-page report on a sector that deals with accredited investors found a “spectrum” of compliance levels among firms surveyed.

Some were determined to be “generally compliant,” while “regulatory action and other steps were taken” for extreme cases. In the middle were firms that “demonstrated varying levels of compliance” and needed to do more compliance work.

Those with deficiencies were subject to varying regulatory outcomes, after which the firms were required to demonstrate that they’d addressed the issues they were flagged for.

A group of firms were still unable to shape up. One firm’s registration was suspended, and another’s was terminated. The provincial regulator had to attach terms and conditions to three firms’ registrations, and considered the same course for two other firms. Two firms agreed to a voluntary cessation, while four firms received warning letters. Several cases were kicked up to the ASC’s enforcement or corporate finance divisions for “consideration and possible further investigation.”

All in all, there were 21 cases wherein firms were deficient. “If all the cases are discrete (meaning no overlap) 21 of the 66 firms — or just under one third – had some issues,” said the piece from the Post. In some of the worst instances, the ASC report found that “firms and their chief compliance personnel did not comply with securities legislation” or “had not adequately supervised dealing representatives’ sales activities.”

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