Although the Investment Industry Regulatory Organization of Canada’s (IIROC) enforcement activity declined in terms of raw numbers in 2017 as a result of an overall drop in complaints, the self-regulatory organization (SRO) is also pursuing several initiatives to boost its disciplinary powers.
Specifically, IIROC’s annual enforcement report, published on Friday, reveals that the number of complaints, investigations and prosecutions at the SRO declined in 2017 compared with the previous year. The SRO reports that complaints were down by 20% last year; this, in turn, reduced the volume of cases that proceed to the investigative stage.
Overall, there were 127 completed investigations last year, down from 138 in 2016, while the number of completed prosecutions dipped to 44 cases in 2017 from 46 cases in the prior year.
In terms of penalties, IIROC ordered $3.4 million in total fines, costs, and disgorgement against individuals in 2017, which was up slightly from 2016, when monetary sanctions totalled $3.1 million. In addition, IIROC handed out five permanent bans (down from six in 2016) and 16 suspensions (down from 20).
As for enforcement activity against firms, IIROC also ordered just more than $1 million in total monetary sanctions, which was up from $425,000 the previous year. As well, the SRO imposed one permanent suspension compared with none in 2016.
The report also shows that IIROC’s collection rate for sanctions imposed on individuals rose to 16.2% in 2017 from 8.3% in 2016, but this is more or less in line with the SRO’s longer term average. Conversely, the collection rate for fines against firms dropped to 91.2% last year from 100% in 2016.
Boosting fine collection rates has long been a priority for IIROC, and it has made a great deal of progress on this front with policy-makers over the past couple of years. Last year, Ontario introduced legislative amendments to enable IIROC to enforce its disciplinary orders in the courts; the SRO is now set to receive similar powers in British Columbia and Manitoba as well. Previously, IIROC only had this authority in Alberta and Quebec.
IIROC’s enforcement report notes that this new authority in Ontario already is starting to have an impact in boosting collections.
“Also, where we have the ability to collect fines through the courts, we see an overall change in behaviour with sanctioned advisors taking their responsibilities to IIROC more seriously,” the report states. “This sends an important message to investors: our regulatory system has teeth and has integrity and, although the vast majority of advisors are ethical and fair, IIROC will hold wrongdoers accountable.”
In terms of disciplinary issues, suitability continues to lead the way, accounting for more than 45% of all prosecutions, IIROC reports. Furthermore, the SRO notes that seniors were involved in approximately 30% of prosecutions in 2017. Prosecutions involving supervisory failings and conflicts of interest were also a priority in 2017, IIROC notes.