Legal Issues

IIROC’s priorities for the year ahead include compliance around CRM2, pre-trade risk controls, cybersecurity and online advice.

The self-regulatory organization (SRO) released its annual Compliance Priorities Report Thursday outlining its focus for the year ahead.

The report identified compliance concerns around CRM2 related to KYC information.

IIROC reported that it continued to find dealers who failed to collect a client’s investment time horizon as part of their KYC processes.

Read: IIROC continuing education rules are here

The SRO also noted several cases where dealers didn’t maintain documented evidence that the required pre-trade disclosure of charges had been made, and where dealers lacked policies and procedures governing that disclosure.

Retail clients must be informed of all fees and charges associated with an instruction to purchase or sell a security in an account before the trade takes place.

Read: We’re in a ‘classic late cycle,’ says economist

Rising robos

The report noted the continued growth in online advice, colloquially known as robo-advisors.

IIROC is developing a testing module for those services that will look for “clear disclosure” about the products and services offered; an account-opening process that includes KYC and “risk-tolerance assessments relative to the complexity of the products offered”; and supervision and oversight of the registrant, the report said.

Cybersecurity and e-trading

IIROC will be focusing more on cybersecurity this year, helping small- and mid-sized dealers develop response plans, the report said.

“In a landscape of heightened security, IIROC believes it is critical for firms to maintain policies and procedures that protect their clients and their businesses by safeguarding personal information and business data,” said Wendy Rudd, SVP member regulation and strategic initiatives at IIROC, in a release.

The report also noted issues with electronic trading controls. “A number of participants have yet to implement effective pre-trade risk controls, creating the potential for market disruptions and significant financial loss,” the report said.

The report also noted deficiencies when it came to reporting outside business activities and filing notices of termination.

Read the full report here.

Also read: Why to report outside business activities

Originally published on Advisor.ca
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VSiva

Regulators sh’d scrutinize Dealers whether they employ competent and qualified staff to adequately supervise business practice. Dealers high staff turnover raises a serious concern on the senior management’s competence, professionalism and operations. Dealer systems sh’d be sophisticated, include “Client KYC Vs Portfolio” comparison, annualized ROR and cumulative commission and charges paid to dealers.

Regulators sh’d review significant DSC charges as it is a failure in suitability and take action. If Branch Managers review carefully most mistakes and wrongdoing/suitability issues can be eliminated. “Client Disclosure and “suitability” are different and Dealers fail to have policies to protect investors.

Dealers be held accountable for approved content used by APs including on websites, social media that may include misleading business titles and credentials that have no relevance or unworthy. It is shocking the Canadian investors are at a receiving end!

Friday, Jan 19, 2018 at 3:22 pm Reply

VSiva

Most issues are originating from dealers due to their failed hiring policies, not identifying fraudulent resumes, apply “who you know” policies and hire without sound industry experience, relevant academic and professional qualifications. One Dealer Senior Compliance staff always say that “DSC to DSC (churning) is not illegal” although it is certainly not in the best interest of investors.

Simply passing easy multiple choice exams, without basic industry knowledge/experience, even if they are previously fired for incompetence in a junior job by another employer, one can become a Director or VP Compliance in Canada. Regulators should review compliance staff resumes/past experience /credentials carefully to ensure whether they are capable to perform their duties in the best interest of clients and ensure the integrity of the industry. Regulators may wonder why if Compliance staff are adequately experienced and qualified, why they seek advisors to manage their personal investments?

Friday, Jan 19, 2018 at 10:48 am Reply