IIROC case highlights power of the banks

A recent disciplinary case out West has re-ignited a discussion around the influence dealers have in SRO sanctioning

Recently a BMO Investorline registered rep agreed to a big fine and suspension by IIROC for forging the signature of a client that was needed to initiate a client’s transfer of shares into a new account.

While some advisors felt the punishment fit the crime, others wondered where the bank was in this entire situation.

“As is the case in most disciplinary actions, the individual advisor is most often the party who pays the highest price as they are the most vulnerable to the regulatory bodies,” commented B.W. Leitch. “These regulatory bodies do not seem to have the power or the willingness to confront the corporations who direct and control the advisors.”

Investor advocate Ken Kivenko who sits on the OSC’s Investor Advisory Panel spoke to this problem in February suggesting that management, not advisors, are the ones responsible for the systemic issues that continue to plague the industry.

“Being an advisor these days, if you try to do the right thing it’s very difficult. I hate to blame them because they’re put into a framework… You keep throwing these commission grids at them [advisors], you give them big awards…,” Kivenko told WP. “There are regulatory issues, dealer issues, ethical issues, but it’s going to show up with the advisor getting the blame.”

IIROC wouldn’t comment on whether BMO Investorline faced a separate disciplinary hearing but the facts of the case suggest one might be warranted in this example, especially when you consider that the branch manager involved could possibly have been the compliance manager as well.  

“The dealership will not be penalized and the bank will do anything to protect itself,” Manulife Advisor Monica Weissmann said reflecting on the case. “They [IIROC] have to have somebody to hang the guilt on and the broker is always the link of least resistance.”

Is IIROC afraid of the banks? Weissmann suggests this is entirely possible.

“[BMO Investorline] is just a sub-division of the bank. To take on them is to take on the bank,” Weissmann said. “How many times did IIROC take on any bank and eventually succeed?”