The Saskatchewan Financial Services Commission says that a local rule governing that province’s deposit agents will come into force on January 1, 2006.

New regulations governing intermediaries who trade in GICs replace the rules that have been in place since March 1993. The commission adopted the original rules in response to the thefts of over $1 million by individuals purporting to collect money from investors for the purchase of GICs, and they were developed with the intention of minimizing the opportunity for fraud or theft by those acting as deposit agents.

The SFSC reports that they have been reasonably successful in reducing instances of fraud or theft by deposit agents. However, the commission now believes that it is time to replace them.

“The rules need to be updated and written in more clear language. They should also be put on a more sound legal footing,” it says. “The rules are guidelines, and if they are not complied with, it is difficult to take direct enforcement action. In cases where an individual deposit agent has misappropriated investors’ money, the rules provide no clear means of recourse for investors.”

The new regulations are an attempt to remedy these shortcomings. It requires a deposit agent to register as a dealer and to be responsible for the actions of its officials and salespersons. It also requires a deposit agent to obtain insurance for losses resulting from the dishonest or fraudulent acts of its officials, salespersons and employees.

“Insurance coverage will provide the deposit agent with the means of compensating investors who suffer loss from the wrongful actions of its officials and salespersons,” it notes. “Because deposit agents, their officials and salespersons are registered, the enforcement provisions of the Act will apply.”