Securities industry scofflaws will soon face tougher enforcement in Ontario as provincial Finance Minister Charles Sousa announced at an industry conference in Toronto on Friday that the Ontario government will introduce legislation to grant self-regulatory organizations (SRO) the power to collect enforcement sanctions against misbehaving advisors through the courts.
The move means that advisors who are subject to the disciplinary sanctions from the Investment Industry Regulatory Organization (IIROC) and the Mutual Fund Dealers Association of Canada will no longer be able to evade their fines simply by leaving the industry. This is a power that IIROC and its predecessor, the Investment Dealers Association of Canada, has long sought.
“This measure will improve the SROs’ ability to collect fines levied against individuals and help to deter potential offenders from wrongdoing in the first place,” said Sousa in a speech delivered at The New Paradigm of Financial Advice conference, which is being co-hosted by three think tanks — the University of Calgary’s School of Public Policy, the C.D. Howe Institute and CIRANO — along with the Toronto Financial Services Alliance.
IIROC President and CEO Andrew Kriegler calls the announcement, “an extraordinarily important step — because regulation doesn’t work unless it has teeth”; with the new power to enforce collections, “People who break the rules will be held to account,” he says.
It’s not yet clear just what the forthcoming legislation will say or whether it will allow IIROC to seek the collection of the almost $20 million in unpaid fines currently outstanding in Ontario. Kriegler says he hopes that the legislation is similar to provisions that already exist in other jurisdictions that allow IIROC to pursue collections through their courts, such as Alberta, Quebec and, most recently, Prince Edward Island.
For now, though, IIROC is celebrating the announcement that legislation will be forthcoming, Kriegler says: “This is a good day. This was something that needed to happen, and I’ve got to give the government a lot of credit — they heard us and they are doing something about it.”
The MFDA is also pleased with the action the Ontario government took on Friday. Says Shaun Devlin, the SRO’s senior vice president, member regulation, enforcement: “This new power will help to hold those who breach MFDA rules accountable for their actions. It will also increase the deterrent effect of MFDA sanctions and enhance investor protection.”
The idea has broad support from the industry, Kriegler notes, including the Investment Industry Association of Canada, the Investment Funds Institute of Canada, the Ontario Securities Commission as well as consumer groups. The challenge has been getting the issue on the government’s radar, he says, and that hurdle has finally been cleared.
A pair of consumer advocacy groups, Prosper Canada and CARP, which also appeared at the conference, lauded the move. Wanda Morris, chief operating officer and vice president of advocacy for CARP, says she “couldn’t be happier” with the announcement, noting that she’s heard many stories of financial distress — and even thoughts of suicide — from members of her group that have been harmed by advisor misconduct.
Liz Mulholland, CEO of Prosper Canada, also voiced support for the decision, noting that it should strengthen the deterrent to advisor misconduct and that higher collection rates will also benefit investor education and financial literacy efforts.
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