IIROC’s second Annual Enforcement Report was released last month. IIROC’s area of focus, from an enforcement perspective in 2013 were as per below:
Seniors and Suitability
Cases involving seniors and suitability-related issues account for more than one-third of all IIROC disciplinary cases. As in past years, suitability complaints comprise the most common complaints received by IIROC through the public and ComSet and opened by case assessment. The Report emphasizes that in reviewing suitability related issues, supervision is an issue.
The Report highlights three cases last year where Registrants were suspended for failing to understand or appreciate the risk tolerance of exchange traded fund products (ETFs) – Frederic Lavoie (Disciplinary Hearing, Quebec), Steven Frank Carinci (Settlement, Ontario) and Derek George Laidlaw Axford (Settlement, Ontario).
In two of the cases, Lavoie and Carinci, IIROC found that the advisors failed to conduct adequate research on the products prior to advising the purchases to their clients. The Report noted that in both cases, the advisors failed to read the products’ prospectuses and did insufficient independent research. In Axford, the advisor stated that he did not believe that certain inverse ETFs were speculative. They were described in the prospectus as being medium- high risk investments.
Direct Market Access
IIROC conducted several trade supervision cases regarding DMA clients.