Amid an overall decline in client complaints, the Investment Industry Regulatory Organization of Canada (IIROC) saw reduced enforcement activity in 2014, according to a new report from the self-regulatory organization.
IIROC released its third annual enforcement report Monday, showing that the total number of client complaints received by its enforcement branch declined notably in 2014 to 1,350 from 1,690 in 2013; which follows a drop from 1,872 complaints in 2012.
Suitability remains far and away the biggest issue in these complaints, representing about 35% of overall complaints; and accounting for 40% of the SRO’s actual prosecutions against individual reps. The second biggest issue is unauthorized, or discretionary, trading, which accounted for 16% of complaints in 2014, up from 9% in 2013. And, misrepresentation ranks third at 5% of complaints received.
With the falloff in complaints, IIROC also saw the number of investigations it completed during the year decline from 200 in 2013 to 174 in 2014. Again, the number of investigations tracked headline complaint volumes — back in 2012, amid higher complaint numbers, in carried out 256 investigations.
IIROC reports that the share of investigations that were referred for prosecution remained more or less unchanged at 59% in 2014, compared with 58% in 2013. Similarly, the number of prosecutions that were completed last year remained constant at 57 (comprised of 10 cases involving firms and 47 against individuals).
Notwithstanding the consistency in the number of cases completed during the year, the quantum of sanctions is down notably from the previous year. Total monetary sanctions for firms plunged from $2.6 million in 2013 to just $251,000 in 2014 (made up of $224,000 in fines and $27,000 in disgorgement).
For individuals, the drop off in sanctions wasn’t as sharp. Yet, total monetary sanctions did decline from $5.3 million in 2013 to $3.4 million last year. Back in 2012, IIROC ordered $12.1 million in monetary sanctions against individuals.
For 2014, just over $3 million in fines was ordered, along with $366,000 in costs and $20,637 in disgorgement. Along with the financial penalties, IIROC also imposed 21 suspensions during the year (down from 25 in 2013), eight permanent bans (unchanged from 2013), eight warning letters (up from five in 2013), and 23 cases of conditions being imposed on registration (also unchanged from the previous year).
The report indicates that IIROC collected 100% of the fines levied against firms, but still only managed to collect 17.3% of the penalties ordered against individuals. IIROC’s senior vice president, member regulation, Paul Riccardi, indicates that it is continuing to work at improving that collection rate. It has started to publish a report detailing the unpaid fines, and Riccardi reports that it’s still working to acquire the same ability to enforce decisions and collect fines in each province that it currently enjoys in Alberta and Qurbec.
“Having this uniform ability will have a direct impact on the ongoing success of IIROC’s national enforcement program, as it sends a strong deterrent message, holds registrants accountable for their actions regardless of where they do business, and gives investors greater confidence in the regulatory system,” he says in the report.
“Our approach demonstrates our commitment to ensuring that the parties involved in an enforcement matter are held accountable, as appropriate, and that those we regulate understand and comply with IIROC dealer conduct and market rules,” adds Riccardi. “Moving forward, we will continue to focus on ways to strengthen our enforcement efforts by ensuring we have the necessary tools to prosecute wrongdoers and send a strong deterrent message to those we regulate.”