In terms of investigations, prosecutions, and fines against individual advisors, the Investment Industry Regulatory Organization of Canada (IIROC) stepped up its enforcement activity in 2012.
IIROC Wednesday published its inaugural enforcement report, showing that the self-regulatory organization initiated 256 investigations and 129 prosecutions last year; up from 213 investigations and 85 prosecutions in 2011.
It also successfully prosecuted 56 individuals and 16 firms in 2012; which is down slightly from 58 individuals and 18 firms in 2011.
In terms of penalties, it levied fines of nearly $1.4 million against firms, down from $1.525 million in 2011. But, fines for individuals reached almost $10 million, up from $6.4 million the previous year. Including costs and disgorgement, total monetary penalties against firms slipped to $1.6 million in 2012 from $1.7 million in 2011; but, they rose for individuals, totaling $10.5 million in 2012, up from $7.9 million in 2011.
Additionally, it reports that four firms and 34 individuals were suspended in 2012, and nine individuals were also permanently barred from the industry.
The report also highlights IIROC’s focus on suitability issues and cases involving seniors. It notes that IIROC receives approximately 1,500 investor complaints each year. In 2012, complaints concerning unsuitable recommendations were the most common type of complaint, it says. And, suitability cases represented almost one third of IIROC prosecutions last year. Moreover, nearly one-third of the disciplinary proceedings in 2012 involved investors that were 60 years of age or older, it says.
Looking ahead, IIROC notes that the protection of seniors is “a strategic priority”, and that it expects cases involving senior investors “will continue to represent a significant portion of enforcement’s total prosecutions in the future.”
“The issue of unsuitable trade recommendations is a persistent and significant problem in the Canadian investment industry,” it says, noting that it has increased its efforts and resources to more aggressively pursue suitability cases in recent years.
“Moving forward, we are committed to finding ways to further strengthen and streamline our enforcement processes to better detect and disrupt potential regulatory misconduct, as well as identify and react to harmful market activity on a more timely basis,” says IIROC senior vice president, enforcement, member policy and registration, Paul Riccardi, in the report.
“We are also working toward the completion of key enforcement initiatives including the finalization of our new consolidated enforcement rules, the development of new sanction guidelines, improved complaint trend analysis and the ongoing enhancement of our market-related enforcement capabilities,” he adds.