Investment industry regulator moves closer to fines due


A new self-regulatory body is about to be launched. It will merge the functions of IIROC and MFDA and will be led by current IIROC CEO Andrew Kriegler.

Canada’s securities regulator says more consistent enforcement powers have allowed it to better collect the millions of dollars in fines it imposes every year, but that making sure the money is reimbursed remains a slow and imperfect process.

The Investment Industry Regulatory Organization of Canada (IIROC), which oversees 174 investment firms and their advisers, said in its latest application reportpublished on Thursday, that collection rates jumped to 79% in its 2020 financial year and 60% in 2021. Both figures are well above the regulator’s previous collection rates, which ranged from 8.3% to 21, 3%. between 2014 and 2017.

The regulator is generally able to collect any fines it imposes on securities firms that wish to remain in good standing with IIROC. He received 100% of the $1.5 million penalties he imposed on the companies in fiscal year 2022, which ended March 31.

So far, IIROC has collected 18% of the $2.8 million in fines it imposed on individual advisers in fiscal 2022. But it expects that proportion to rise significantly. more in the coming year as the courts apply fines, some penalized advisors make monthly or quarterly installments, and payouts from year-end rulings begin to flow.

Uncollected fines against individuals are a sore point for IIROC and another self-regulatory organization, the Mutual Fund Dealers Association (MFDA). In response, regulators have lobbied provinces and territories to grant them broader and more consistent legal powers to collect fines through the courts and to investigate crimes against investors. The expansion of these powers to Ontario in 2017 and British Columbia in 2018 (these two provinces concentrate the lion’s share of IIROC’s investigations and enforcement actions) marked a turning point.

Since November, when Newfoundland and Labrador signed on as the sixth province to give IIROC what it calls a “comprehensive enforcement toolkit,” the regulator has been able to enforce the recovery of fines through the courts of every province and territory in Canada.

Before the changes, investment advisers who faced penalties could avoid paying fines by leaving the securities industry and dropping their registration with IIROC.

“People were just leaving the industry and we really had no real, tangible way to collect that money,” Charles Corlett, vice president of enforcement at IIROC, said in an interview. . “Now we can take action in court to collect those fines the same way you would after winning a civil case.”

More recently, Corlett has seen an increase in the number of penalized advisors “who just agree to pay us” without IIROC having to act on the threat of going to court. “It’s something of a huge sea change in the sense that these people recognize, ‘You know what, I have to pay for this, I’m accountable to the industry for being disciplined,'” he said. declared.

Yet, it may still be years before IIROC collects the fine money. From 20 to 40% of the sanctions imposed are still not collected. Even though the regulator now has the power to find assets, garnish wages or seize homes, “the sad reality is that some people who are involved in the enforcement process, when they are in trouble.. .they may be close to insolvency,” Corlett said.

The full panoply of powers that provinces such as Newfoundland, Alberta and Quebec have provided to IIROC allow it to collect and present evidence in hearings and protect the regulator from malicious lawsuits. But IIROC still doesn’t have all of these additional powers in Ontario and British Columbia. “We still think it’s a priority to try to get the full application toolkit where we can,” Corlett said.

Later this year, a new self-regulatory organization is expected to launch and will merge the functions of IIROC and MFDA. It will be led by current IIROC CEO Andrew Kriegler.

The total of nearly $4.4 million in fines, disgorgements and costs imposed by IIROC in fiscal year 2022 was approximately double the prior year’s total of $2.2 million, and comparable to several previous years. IIROC completed 76 investigations and referred 41% of those cases for prosecution, the highest rate since 2018.

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