The Investment Industry Regulatory Organization of Canada (IIROC) is proposing a new set of guidelines that help set out how the sanctions handed down in disciplinary hearings are determined.
The proposed guidelines released Wednesday would consolidate the existing separate guidelines for determining the appropriate sanctions under the dealer rules and the trading rules, which set out the principles and factors that may be considered when imposing sanctions amid IIROC disciplinary proceedings. IIROC says that it believes that “this will promote greater transparency and clearly convey to stakeholders how staff will, and hearing panels may, approach sanctioning decisions in an enforcement proceeding.”
Among the changes proposed, the revised guidelines would eliminate prescribed fine ranges and/or suggested minimum fines; and, it also proposes to alter how a respondent’s inability to pay is considered.
The notice indicates that IIROC staff believe that specific guidelines for itemized regulatory violations are no longer necessary or useful. “The removal of specific guidelines for itemized regulatory violations will address the mistaken notion that sanction decisions are formulaic and determined through the application of a checklist, and will reinforce the concept that appropriate sanctions are determined on a case-by-case basis, having regard to the relevant principles, factors and specific circumstances of the matter,” it says.
The revised guidelines would also eliminate a disparity between dealer rules and trading rules in terms of a respondents’ ability to pay. The new guidelines would expressly provide that a respondent’s bona fide inability to pay may be considered as a factor in sanctioning and sets out the general framework for raising it before a hearing panel.
Additionally, IIROC is publishing for public comment three companion policy statements that provide guidance regarding its’ staff’s approach to the issues of: long suspensions; internal discipline by a dealer; and, credit for co-operation.
The policy statement regarding suspensions would eliminate specific suspensions longer than five years. “Staff believes that if conduct is sufficiently egregious that a suspension of five years or greater is warranted, a permanent bar will normally be sought,” it says.
This policy on internal discipline confirms that IIROC staff will consider discipline imposed by the employer as a mitigating factor, and that hearing panels will be encouraged to identify this factor in their decisions in order to encourage “compliant cultures” at dealer.
Finally, the policy on credit for co-operation will draw a distinction between “required co-operation” and “proactive and exceptional co-operation”
The proposals are out for a 90-day comment period, ending Feb. 3, 2014.