Regulatory enforcement activity in the mutual fund sector rose last year, according to the Mutual Fund Dealers Association of Canada’s (MFDA) latest enforcement report.
In 2021, the number of disciplinary proceedings launched and concluded by the MFDA were both up from the previous year, and the penalties imposed in those cases rose too.
According to the report, the MFDA imposed $4.3 million in fines last year, up from $3.35 million the previous year. It also ordered $433,163 in costs in 2021, an increase from $369,501 in 2020.
The number of non-monetary penalties imposed by the SRO also increased, including a total of 19 permanent bans (up from 16), and 35 suspensions (up from 24).
The increase in penalties came as the number of proceedings concluded by the MFDA rose to 95 in 2021, from 77 in 2020.
The number of disciplinary cases initiated during the year also increased to 91 last year (including four cases against dealers), up from 79 in 2020.
According to the report, the number of new enforcement proceedings rose even as the volume of cases opened during the year declined, to 414 in 2021, from 461 in 2020.
The MFDA also reported that its penalty collection rate jumped to 45% in 2021 (amounting to almost $2 million) from 29% in 2020 and 19% in 2019.
Since it first began imposing disciplinary sanctions in 2004, the SRO’s collection rate is 16%, the report showed.
In that time, MFDA hearing panels have imposed $104.8 million in total fines, and it has collected $17.1 million of that total.
The report indicated that the MFDA’s enforcement priorities include the adequacy of supervision by fund dealers, dealer complaint handling, and the protection of seniors and other vulnerable investors.
The SRO reported that 28% of the cases it launched in 2021 involved seniors or vulnerable investors, and that it continues to see issues such as seniors getting unsuitable advice from their reps. MFDA also continues to observe reps borrowing money from older clients and reps taking on executor duties.