IIROC report highlights need to strengthen enforcement powers

During the year, the self-regulatory organization (SRO) saw its enforcement activity against firms increase. It completed 12 cases with firms and ordered almost $1.6 million in fines, costs and disgorgement against them; up from $251,000 in monetary sanctions in 2014 in 10 cases.

At the same time, disciplinary activity against individual reps declined a bit, as IIROC brought 40 cases during the year, down from 47 in 2014. Overall monetary sanctions involving individuals declined from $3.4 million in 2014 to just under $3.0 million in 2015. In addition to the monetary sanctions, the SRO also levied 26 suspensions, imposed registration conditions against 23 individuals, and issued five permanent bans.

Total monetary sanction activity increased a bit year over year, but collection rates declined. IIROC reports that it collected just 13.2% of the sanctions imposed on individuals during the year, down from 19.8% in 2014. And, it only collected 84% of the monetary penalties imposed on firms. IIROC typically collects 100% of the penalties levied on firms.

Amid the deteriorating collection rates, IIROC is once again reviving its call for the power to enforce its disciplinary decisions as orders of the court (which is currently a power it only has in Alberta and Quebec).

“As a public interest regulator, we need to have the tools necessary to vigorously and effectively protect the public. That’s why we have been seeking legislative changes that would enable us to improve the collection rate of fines and send a strong message that if you breach the rules and abuse the trust of your clients, you must pay the penalty,” says Andrew Kriegler, president and CEO of IIROC.

The proportion of cases that were settled, instead of going to a hearing, rose a bit last year, the report indicates. Of the 52 total cases completed in 2015, 39 were settled, and 13 went to a hearing. In the previous year, 36 cases were settled, and 21 were resolved at a hearing.

In 2015, complaint activity was more or less flat. The top complaint remains suitability-related issues, followed by unauthorized trading. Almost 50% of the cases IIROC brought against individual reps during the year featured suitability issues, the report notes. Moreover, most of these cases also involved vulnerable clients, such as seniors. The cases against firms largely focused on supervisory failings.

The report also indicates that IIROC enforcement completed 124 investigations in 2015, down from 174 in the previous year, and 59% of these cases were referred for prosecution, which was unchanged from 2014.

Photo copyright: serezniy/123RF