CSA review of IIROC mostly positive

By Staff | April 1, 2011 | Last updated on April 1, 2011
3 min read

The Canadian Securities Administrators (CSA) today released its oversight review of the Investment Industry Regulatory Organization of Canada (IIROC).

In the review, the CSA assesses IIROC’s compliance with the relevant terms and conditions of recognition, and makes a determination as to whether regulatory processes at IIROC are adequate, consistent and fair. The review also examines the progress of integration following the creation of IIROC in 2008 from the merger of the Investment Dealers Association of Canada and Market Regulation Services.

The review concludes that IIROC is in “substantial compliance” with the terms and conditions of its recognition order as a self-regulatory organization, though it identifies a number of areas for improvement. The recommended improvements are assigned a priority designation of low, medium, or high.

Three of the high-priority recommendations made in the 247-page review are as follows:

  • IIROC should review its practice of closing investigations without further proceedings in circumstances where dealers take self-corrective steps, and instead conduct disciplinary proceedings in such circumstances and afford hearing panels discretion to evaluate self-corrective steps as mitigating factors on sanction, which would support IIROC’s regulatory objective of achieving general deterrence through transparency of Enforcement proceedings.
  • In cases where the assessment of the files depends, to some extent, on the version of events as described by opposing parties, IIROC should not close the files simply because it was not privy to discussions between the registrant and the client and because it cannot assess the veracity of their respective positions. Rather, IIROC should seek more clarity by interviewing the complainant and the approved person, and by seeking corroboration of respective version of the events from available documents or other evidence. In particular, where there are material indications of misconduct, IIROC should at a minimum obtain statements from registrants and complainants. NBSC staff could assist in obtaining any such necessary statements or evidence.
  • IIROC should be more proactive in pursuing and advancing cases to prosecution in instances where there is evidence that supervision of a Dealer Member is an issue.

The review includes IIROC’s reponses to these recommendations. In the case of the first, IIROC agreed to conduct a review of its procedures.

To the second recommendation they responded as follows: “IIROC disagrees with this finding. When IIROC opens an investigation, it endeavours to gather evidence from all relevant parties and assesses the totality of that evidence against the standards and principles of our rules. IIROC does not close files on the basis of any representation made to us by the subject of an investigation. IIROC has pursued and initiated enforcement proceedings where the parties have provided conflicting versions of the relevant event(s).”

IIROC also took issue with the third recommendation: “The files reviewed by the CSA which form the basis for this recommendation do not support the finding. In the files cited by the CSA as examples that IIROC was not proactive in advancing supervision cases where there was evidence of misconduct, it was determined by IIROC staff that there was insufficient evidence to initiate proceedings. In both cases there were memos on file outlining the basis for the determination of insufficient evidence. IIROC staff reviews the supervision of the underlying alleged misconduct in every investigation file.”

In response to this disagreement the OSC promised to continue its dialogue with IIROC Enforcement staff “to achieve consistency in the approach regarding cases related to supervision.”

The full review is available here.

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The staff of Advisor.ca have been covering news for financial advisors since 1998.