The Investment Industry Regulatory Organization of Canada is going to be examining compliance with complaint handling rules, and the use of advisory titles in the months ahead, the self-regulatory organization said Wednesday.
In its newly released report, which gives results of the latest round of compliance examinations, IIROC also says that in the current exam cycle it will be focusing on compliance with the client complaint handling rule, which came into effect in 2010. The review consists of a client complaint handling survey and the examination of client complaints handling processes at select dealers.
IIROC says that the initiative is designed to ensure that firms have implemented the rule in the context of their business models; examine the procedures and processes introduced to achieve the rule’s desired outcomes; look at whether the rule has enhanced consumer protection; and, understand any challenges or operational difficulties encountered by firms. It expects the initiative will provide examples of ‘best practices’, which IIROC will be able to share with other dealers in a guidance notice.
The regulator also reports that it has also undertaken a targeted survey regarding the use of titles, designations and other descriptors by reps and other employees. IIROC says that the use of certain titles and designations such as “financial planner”, “retirement specialist” or “senior advisor” are intended to convey an impression of proficiency and invite client trust. “It is, therefore, important that there be appropriate rigor, consistency and controls around the use of titles,” it says.
The survey aims to improve the regulator’s understanding of: internal firm policies relating to the use of titles; the internal approval process for the use of such titles; the range of titles being used; and, it will also look at investor complaints relating to the use of titles and designations, among other things.
Also in the report IIROC spells out some of the common deficiencies uncovered in its latest round of compliance exams, including: the use of inaccurate margin rates; order-execution services that provide clients with ‘planning tools’ that may deliver what amounts to a recommendation, which would require a suitability review; instances where firms have not adequately identified conflicts of interest; and, that it also continues to see a lack of adequate controls around the sale of private placements to accredited investors, and instances where dealers have not adequately supervised the activity within employee accounts.