The Compliance team of the Capital Markets branch of the Ontario Securities Commission has released an annual report detailing the results of its compliance reviews of investment counsel and portfolio managers (ICPMs).
The report relates to activities from April 1, 2002 to March 31, 2003. It describes various compliance initiatives and issues relating to ICPMs, and reports common deficiencies identified during field reviews.
The 10 most common deficiencies noted in the reviews of deal with:
- policy for fairness in allocation of investment opportunities;
- maintenance of books and records;
- statement of policies;
- policies and procedures manual;
- capital calculations;
- portfolio management;
- marketing;
- know your client and suitability information;
- personal trading; and
- registration issues.
Among other things, OSC staff observed firms charging advisory fee to clients that was not consistent with the rate stated in the advisory agreement, and clients’ portfolio holdings that were not in compliance with their investment restrictions.
The review also found that performance data of mutual funds was not disclosed for the required time periods, firms suggested their reporting was AIMR compliant when it wasn’t, and that personal trading policies in place but not enforced.