Time to lien on advisors

For regulators complaining about unpaid fines there’s a quick but perhaps painful solution.

Time to lien on advisors

One industry vet is questioning why regulators simply do not impose liens against errant advisors as they do in Alberta is rejecting the call for firms to pay.

“Rather than make firms pay advisor fines, why not follow Alberta's example and allow liens?” said Bruce Palmer, in a recent comment on WP. “It seems like an effective way of punishing the guilty (rather than everyone else left in the industry) and still collecting the fines. And might even deter behaviour a bit, which is not such a bad thing.”

The comments come on the heels of a new report from the MFDA outlining its 2014 collection of fines. While it imposed more than $7.5 million, only slightly more than 2 per cent were successfully collected.

At a time when advisors are saying issuing a fine to an advisor who’s been permanently prohibited from selling mutual funds is counter-productive because it doesn’t deter against future actions by others.

Until both the firm and advisor are held financially responsible for breaking MFDA rules, those who aren’t interested in abiding by those rules will continue to break them knowing there won’t be any financial consequences other than being permanently banned.

Rona Birenbaum, a wealth advisor with Caring for Clients, said a lien could enforce and uphold the penalties.

“The bottom line is that the MFDA needs more teeth,” she told WP.

She added that the difficult part of imposing these kinds of penalties is that in most cases, many dealers or firms are unaware that the fraudulent activity was taking place.

“Including the dealers in the fine is problematic to some degree,” Birenbaum said. “In many cases, the fined dealer had no knowledge of the egregious activity and the activity was done outside of the dealer’s compliance regime. That being said, if the dealer was complicit with the advisor or if the dealer’s compliance regime was poor and part of the problem, then there should be shared responsibility.”