Self-regulator underscores remedial measures, senior protection, and expanded toolkit in latest enforcement report
Going beyond deterrence, the Investment Industry Regulatory Organization of Canada (IIROC) turned its attention to dealer firms’ internal control measures and supervision over the past year.
In its enforcement report for the fiscal year 2020-2021, IIROC highlighted the importance of ensuring its member firms are taking appropriate remedial measures in cases of supervision failures.
“Our focus was not merely on sending a deterrence message to the firms, but on ensuring that adequate remedial measures had been or would be implemented to prevent a reoccurrence of the failures,” the report said.
The regulator reported eight prosecutions completed against firms, five of which involved issues on supervision. Across those eight cases, it handed down $1,100,000 in fines, and ordered payment of $105,000 in costs.
Seniors and vulnerable clients were also a key priority over the past year, representing a reported one fourth of completed prosecutions against individuals. Out of nearly 30 individual violations, eight involved concerns surrounding suitability, due diligence, or handling of client accounts, and five centred on inappropriate discretionary trading.
Across 21 decisions IIROC handed down against individuals, the regulator ordered a total of $766,500 in fines and $121,500 in costs, along with $88,851 in disgorgements. Non-financial penalties, meanwhile, included 13 suspensions, two permanent prohibitions, and 12 conditions.
The fiscal year 2021 saw 113 investigations completed, with 25% of files being referred further to prosecutions. Of the 29 prosecutions IIROC completed this year, 21 ended in settlement agreements.
IIROC also highlighted its strategic initiative of introducing alternative forms of discipline. In particular, it noted the implementation of early resolution offers. Under that option, dealer members and approved persons involved in prosecutions are granted a 30% reduction on sanctions that staff would otherwise seek in a settlement agreement along with a quicker resolution of enforcement proceedings.
“Concurrently, we also announced that IIROC would be withdrawing proposed amendments to implement a Minor Contravention Program,” the SRO said, citing concerns raised by public commenters.
It also reaffirmed its commitment to engaging with provinces to acquire a full enforcement toolkit, which consists of the authority to collect fines through courts, expanded authority to collect evidence at the investigative and hearing stage, and statutory immunity for IIROC and its personnel when acting in the public interest.
“While understandably no additional powers were obtained since the pandemic began, we will continue to make efforts to add to these powers through targeted requests to provincial governments,” IIROC said.