The Canadian Securities Administrators' (CSA) recent compliance review of small firms such as fund managers and exempt-market dealers has found widespread deficiencies, particularly when it comes to meeting disclosure, know-your-client (KYC) and client reporting obligations.
The results of the CSA's review of 65 small firms, largely sole proprietorships or one-person shops, which was carried out between Oct. 1, 2014 to June 30, 2016, were published in a notice on Thursday that provides additional guidance for these firms to meet their obligations.
The CSA's notice reports that the regulators found 63% of firms had inadequate relationship disclosure information; 54% were found with KYC deficiencies; and 45% either failed to deliver, or provided inadequate, client statements.
In addition, 71% of the firms were found to have inadequate written policies and procedures. Less common deficiencies involved firms' business interruptions plans and succession planning, incomplete books and records, and incorrect accounting methods or procedures.
"We identified that small firms can be at risk of failing to meet requirements of applicable securities legislation if they do not have: a comprehensive plan to address significant business interruptions and succession issues; monitoring systems that are reasonably likely to identify non-compliance at an early stage; and, supervisory systems that allow the firm to correct noncompliant conduct in a timely manner," the CSA's notice states.
The CSA indicates in the notice that it intends to continue to review and evaluate firms' compliance practices.
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