Securities regulators will give credit for exceptional cooperation, and for internal discipline, when considering enforcement sanctions, according to new guidelines unveiled Tuesday.
The Investment Industry Regulatory Organization of Canada (IIROC) has issued Revised Sanction Guidelines that set out the principles and key factors to be considered by hearing panels when handing out disciplinary penalties. The new guidelines take effect on Feb. 2, and will be applied to all disciplinary and settlement proceedings.
The new guidelines consolidate, update and replace all previous versions of sanction guidelines. At the same time, IIROC also finalized accompanying policy statements that, among other things, set out the regulator’s approach to providing credit for cooperation during settlement negotiations and in disciplinary proceedings.
It notes that IIROC staff will only consider “proactive and exceptional cooperation” as a mitigating circumstance. “A respondent cannot claim credit for proactive and exceptional cooperation while consistently missing investigation deadlines, providing incomplete or misleading responses to information or document requests, or otherwise delaying or impeding the progress or completion of an investigation,” it says.
The policy also provides examples of factors that constitute exceptional cooperation, including self reporting violations and actively assisting investigations; and, whether the cooperation leads to faster resolution of enforcement cases, which allows the regulator to conserve enforcement resources. “The extent of credit will vary depending upon the other factors such as the nature of the contravention, the extent of harm to clients and/or market integrity, the duration and extent of the misconduct, and the existence of a prior related disciplinary record,” it notes.
The policy statements also indicate that while IIROC staff will consider the sort of internal disciplinary action that’s taken in a particular case, it says that “it would be an exceptionally rare circumstance where internally imposed disciplinary sanctions would result in no IIROC disciplinary proceeding.” Rather, it says that internal discipline may reduce the sanctions, not eliminate them completely.
IIROC also indicates that in cases where a violation merits a suspension of at least five years, it will generally seek a permanent ban.
“We continue to strengthen our enforcement process to better detect, deter and disrupt potential regulatory misconduct, as well as to identify and react to harmful market activity,” said Paul Riccardi, senior vice-president, member regulation, at IIROC. “This initiative helps to ensure consistency and to promote transparency by clearly communicating how IIROC will approach sanctioning decisions in enforcement proceedings.”