Re: Fixing the broken windows, (IE, August 2013)
Your editorial alleges that rule violations are endemic in the Canadian investment industry and recommends that regulators “should come down a little harder on the small stuff” before it escalates into serious abuse.
These allegations could be taken to be aimed straight at investment dealers, even though the evidence is apparently drawn from recent Canadian Securities Administrators (CSA) staff reviews of the disclosure practices and sales communications of exempt-market dealers (EMD) registrants and investment counsel and portfolio managers (IC-PM) registrants, infractions itemized in CSA Staff Notice No. 31-334 and Ontario Securities Commission (OSC) Staff Notice No. 81-720.
Regrettably, the editorial failed to distinguish between the investment industry and registered Investment Industry Regulatory Organization of Canada (IIROC) firms and advisors not part of the CSA staff review [or to note that] EMD registrants and IC-PM registrants were the subject of the reviews.
This careless tarring of all registrants with the same regulatory conclusion unfairly damages the professionalism and reputation of the Canadian investment dealer community. It is not surprising that CSA and OSC staff reviews have focused on the disclosure and sales practices in the managed funds sector and [among] EMD participants. Those are where the problems have been.
When it comes to the “big stuff” or major scandals in the retail markets, plenty has happened in recent years – but none of it in the investment dealer industry. The more egregious scandals in recent times include the Toronto Stock Exchange-listed Sino-Forest fraud, and other scandals, including the Norbourg and Portus funds and the Earl Jones affair.
Moreover, not only has the industry not been the source of scandal, but it has exhibited a good track record of behaviour.
This fact is reflected in the roughly 1,500 client complaints received last year compared with almost 200 million equities transactions in the same period and the 10 million client accounts administered by IIROC-registered firms.
It should be further noted that almost two-thirds of client complaints filed through the Ombudsman for Banking Services and Investments are settled in favour of the firm, as opposed to the complainant.
The investment industry supports tough rules and vigorous oversight, and heavy penalties for wrongdoers – to the extent of expelling serious wrongdoers and repeat offenders from our industry – and has consulted extensively with the regulators to improve the regulatory framework. At the same time, the industry expects the media to make diligent efforts to interpret carefully the decisions reached by regulators and staff to ensure communication is accurate and fair.
Your August 2013 editorial falls far short of the mark.
President and CEO, Investment Industry Association of Canada,
Re: IE editorials
I am writing to say that I am impressed with your candour and willingness to write from an investor’s perspective, even though your primary audience is the advisor community.
I have been encouraged by your sense of urgency around regulatory improvements on transparency in reporting and compensation. Not exactly what many distributors may be hoping for!
Keep it up.
Director, business development,
Steadyhand Investment Funds Inc.,
© 2013 Investment Executive. All rights reserved.