Self-Regulatory Standards and Enforcement Practices

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1 Self-Regulatory Standards and Enforcement Practices September 13, 2014 Alexandra Clark Director, Enforcement Litigation

2 Overview of the Canadian Regulatory System There are several parts to the financial services industry in Canada including banking, insurance, and capital markets. Capital markets (securities) regulation is a provincial responsibility. Each of the provinces and territories has its own regulatory body. The provincial and territorial regulators oversee the selfregulatory organizations (SRO): Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada, who in turn regulate their members. 2

3 Overview of the Canadian Regulatory System Generally, investment firms and advisers must be registered with the regulator or a self-regulatory organization in order to sell investment products and provide advice to Ontario investors. Advisers must register before they can provide services to you, and they have to meet certain requirements in terms of education and experience. Regulators and self-regulatory organizations have the power to suspend or cancel registration and discipline registrants under securities laws or SRO by-laws. 3

4 Self-Regulatory Organizations The Investment Industry Regulatory Organization of Canada (IIROC) regulates investment dealers firms that sell securities and their salespeople. The Mutual Fund Dealers Association of Canada (MFDA) regulates mutual fund dealers and their salespeople. 4

5 IIROC What we do IIROC s mission is to set and enforce high quality regulatory and investment industry standards, to protect investors and to strengthen market integrity while maintaining efficient and competitive capital markets. 5

6 IIROC What we do IIROC is a national organization, and has offices in: Toronto (Head Office) Montreal Calgary Vancouver 6

7 IIROC Making a complaint Our case assessment officers can help you to make your complaint to us or direct you to another appropriate body. Remember - you can file a complaint with IIIROC and your firm at the same time 7

8 IIROC Case assessment Assessing the complaint Does the complaint involve an IIROC firm or registrant? Is the complaint a regulatory matter (not service related)? Is there evidence of a violation? If yes to all, the complaint is sent to investigators. 8

9 IIROC Investigations Collecting evidence Investigators review the file, interview witnesses and record testimony, request documents etc. Using our resources Forensic accountants, lawyers, investigators, custom-designed software etc. 9

10 IIROC Prosecutions If there is enough evidence to demonstrate that a violation of our by-laws has occurred, the matter goes to prosecutions. The matter may be resolved by settlement agreement or in a contested hearing. All hearings are conducted before a three person Hearing Panel. 10

11 IIROC Prosecutions - Sanctions Hearing Panels can impose a number of sanctions on individuals, including: a reprimand a fine of up to $1 million per contravention the imposition of conditions on registration a period of suspension of registration a permanent ban from registration 11

12 IIROC Prosecutions - Sanctions Hearing Panels can impose a number of sanctions on firms, including: a reprimand a fine of up to $5 million per contravention the imposition of conditions on membership a suspension of membership expulsion from membership 12

13 IIROC Prosecutions Informing the public We inform the public when we hold disciplinary hearings. When we impose a discipline penalty on a firm or one of its registered employees, we put that information on our website, and issue a news release. Contested discipline hearings are open to the public, except when a Hearing Panel determines otherwise. 13

14 IIROC Enforcement Report In 2013, IIROC conducted 200 investigations across Canada, and initiated 57 prosecutions: 45 against individuals and 12 against firms. The three most common complaints received last year: unauthorized trading, unsuitable investments and misrepresentation. 14

15 IIROC Enforcement Report The four most common individual violations prosecuted in 2013: suitability inappropriate personal financial dealings discretionary trading off-book transactions The most common firm violation was a failure to supervise a representative. 15

16 IIROC Enforcement Report Since 2011, we have focused particularly on incidents involving seniors and vulnerable investors. In 2013, approximately 37% of complaints involved seniors. In response, approximately 40% of prosecutions related to misconduct against seniors. 16

17 IIROC Enforcement Report For further details concerning the enforcement process, see the 2013 Enforcement Report located on the IIROC website 17

18 The IIROC Website Resources on our website: how to choose an advisor AdvisorCheck Glossary of Financial Designations how to make a complaint dispute resolution options, including how to get your money back 18

19 How to Contact Us