Earlier this month, the Investment Industry Regulatory Organization of Canada (“IIROC”) published its annual Enforcement Report for 2018 (the “Report”), highlighting its enforcement/discipline activities over the course of 2018. The Report summarises IIROC’s enforcement process, activities, priorities, statistics and also provides illustrative case highlights.
Summary of IIROC Enforcement Related Activities
In 2018, IIROC:
- completed 127 investigations (same in 2017);
- prosecuted 42 individuals and 10 firms (compared to 37 individuals and 7 firms in 2017);
- suspended 21 individuals (compared to 16 in 2017) and permanently barred 5 individuals (same in 2017) from working at an IIROC-regulated firm in a registered capacity;
- terminated 2 IIROC-regulated firms (compared to 1 in 2017);
- imposed total sanctions of $3.2 million (compared to $3.4 million in 2017) against individuals and nearly $1 million (same in 2017) against IIROC-regulated firms;
- collected 14.7 per cent of fines (compared to 16.2 per cent in 2017) against individuals and 85.3 per cent of fines against firms (compared to 91.2 per cent in 2017);
- continued to investigate and prosecute enforcement cases involving seniors. Seniors were involved in one-third of cases reviewed and approximately a quarter of all prosecutions, with half of all suitability cases involving seniors; and
- remained focused on suitability, which was the top complaint and represented a third of all prosecutions.
Among the subject matters resulting in enforcement sanctions either by way of settlement or panel decisions were proceedings involving improper handling of:
- conflicts of interest;
- suitability obligations, particularly with respect to elderly or vulnerable investors;
- KYC collection and updating;
- confidentiality of client information;
- supervision of accounts;
- duties of senior officers;
- securities trading involving market manipulation; and
- sales incentives pertaining to mutual funds.
IIROC’s priorities for future enforcement initiatives include:
- obtaining legal authority across Canada to collect fines;
- enhanced authority to collect and present evidence for enforcement proceedings;
- obtaining statutory immunity for IIROC staff when acting in the public interest; and
- developing alternative forms of disciplinary action. See our recent blog post on IIROC’s Two New Forms of Disciplinary Action.