The Investment Industry Regulatory Organization of Canada has released its first comprehensive Enforcement Report for 2012.
The report highlights its ongoing efforts to deliver fair and timely enforcement of IIROC’s member conduct and market integrity rules.
It also offers an overview of the organization’s role in domestic securities regulation and enforcement over the last year.
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Specifically, the report outlines IIROC’s enforcement priorities and initiatives, and it summarizes noteworthy cases. Those involving senior clients’ suitability—those aged 60 and older—were prioritized. They accounted for almost one-third of proceedings.
The report stresses, “[With] the average age of Canadian investors continu[ing] to rise, the protection of seniors is a strategic priority. We expect cases involving senior investors will continue to represent a significant portion of Enforcement’s total prosecutions in the future.”
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One of the cases discussed involves a rep from Saskatchewan who recommended risky investments to two retired couples rather than offering strategies focused on capital preservation. In that particular case, he faced a fine of $100,000, as well as disgorgement of $47, 383.
He was also prohibited from registering for one year, and has to take Conduct and Practice Course before being able to re-register as an IIROC member. That will be followed by strict supervision, says IIROC.
IIROC also had a hand in protecting foreign investors in 2012, says the report. “One such case saw IIROC work with U.S. immigration authorities and the RCMP to facilitate the return to Canada of a former investment advisor who fled the country after being prosecuted by IIROC.”
The organization says it also focuses on proactive, preventative measures. In its dealings with Peregrine Financial, for example, IIROC says it was one step ahead of any potential or further misconduct by transferring clients accounts and suspending the firm as soon as Peregrine’s bankruptcy was announced.
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Each year, IIROC receives approximately 1,500 investor complaints. In 2012, complaints of unsuitable investment recommendations were most common complaint type.
As a result, nearly one third of prosecutions involved unsuitable investment claims.
The report reveals:
- IIROC initiated 256 investigations and 129 prosecutions
- IIROC successfully prosecuted 56 individuals and 16 firms
- Fines of nearly $1.4 million were made against individuals, and almost $10 million were imposed against firms
- 4 firms and 34 individuals were suspended, and 9 individuals were permanently barred from working at an IIROC firm in a registered capacity
Moving forward, “We’re working toward the completion of key enforcement initiatives, including: the finalization of our new consolidated enforcement rules; the development of new sanction guidelines; improved complaint trend analysis; and the ongoing enhancement of our market-related enforcement capabilities,” says Paul Riccardi, IIROC’s senior vice president of enforcement, member policy and registration.
Read the full 2012 Enforcement Report.
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