Lost device to cost IIROC $5.2 million

In response to the lost device, IIROC launched a large effort to contact all of the affected dealers and clients, and it also pledged a number of measures to prevent any damage to clients by providing credit alerts, credit monitoring and a dedicated call center for affected clients. So far, it says, that it hasn’t received any reports of identity theft or fraud resulting from the loss of the portable device.

IIROC pushing forward with security review

The cost estimate includes the expense of those remedial steps, along with professional services and other anticipated expenses, it says, but not any possible future damage claims. A class action suit in the matter has been filed in Quebec, seeking damages for affected clients, but that suit has not been certified, and the allegations have not been proven.
IIROC indicates that it doesn’t expect a ruling on this proposed suit until late 2014.

The regulator has pledged this incident won’t result in higher fees for dealers. Instead, the report indicates that to ensure fees won’t go up as a result, budgeted salary increases will not be awarded to its staff in fiscal 2014; discretionary expenses, such as travel and outside counsel costs, will be reduced; and, $3.3 million surplus generated by the SRO in 2013 will also be used partially to offset those expenses.

As a result, while fees were to rise by 3% for dealers and by 9% for market regulation in the year ahead, the use of its surplus (which IIROC attributes to higher underwriting revenues and lower technology costs due to the elimination of its old market surveillance system) means there will be no fee increase for fiscal 2014, it says.

The report does project that total operating expenses for the coming year are budgeted to increase by 6% to $91.7 million, driven primarily by staffing vacant positions and rising pension expenses. Technology costs are also heading higher, it notes, as it develops a new debt surveillance system; and, telecom and hearing costs are rising too. IIROC stresses that it is continuing to strengthen its overall security and information management practices too. Additionally, it says it is closing its defined benefit pension plan to new employees, and increasing employees’ contribution rates.

The report also indicates that IIROC is facing a lawsuit for wrongful dismissal. “Management believes the action is without merit and will be defending the action vigorously,” it says, adding that the outcome of the suit, and the amount of any loss, “is not reasonably estimable at this time.”

In terms of complaint activity, the report says that IIROC received 481 complaints about dealers last year, which is up by 7.4% from the previous year; and, there were almost 1,500 complaints filed by clients with dealers themselves, up 8.7%. Many of these dealt with suitability issues, and issues involving seniors in particular, it says.

It reports that, over the past fiscal year, more than 45% of all case assessment files dealt with suitability complaints, and approximately 43% involved seniors. About 30% of cases involved seniors and suitability.