Investor advocates criticize IIROC’s proposed enforcement tools

By James Langton | July 5, 2019 | Last updated on July 5, 2019
2 min read

Investor advocates are sounding the alarm about new enforcement tools proposed by the Investment Industry Regulatory Organization of Canada (IIROC), which would provide the self-regulatory organization with more disciplinary options.

In a letter to regulators, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) reiterated its objections to IIROC’s proposed new minor contravention program (MCP) and its proposed new policy guidance on early resolution offers (ERO).

IIROC has said the new tools would expand the options available to its enforcement staff, enabling them to resolve certain cases more efficiently.

However, “FAIR Canada remains unable to support the MCP and ERO proposals in their current form,” the group said in its letter.

The proposed MCP would enable the SRO to sanction advisors for minor offences with set fines and without the need for a formal hearing.

But a key concern for investor advocates is that, unlike traditional regulatory processes, the offenders would not be publicly identified.

“The MCP will not result in a public record of the [rep] having been disciplined that is accessible by clients, prospective clients or prospective investment dealer employers,” FAIR Canada said.

“FAIR Canada questions how such an outcome is in the public interest and consistent with IIROC’s stated goals of protecting investors and supporting healthy Canadian capital markets.”

This concern was echoed by the Ontario Securities Commission’s (OSC) Investor Advisory Panel (IAP).

“It is a bad bargain if IIROC trades away public disclosure, transparency and accountability in order to encourage quicker settlements,” the IAP said in its own letter.

“The fixed fine and elimination of formal proceedings contemplated by the MCP should be more than enough incentive to induce more timely settlements,” the IAP added.

FAIR Canada also has concerns with IIROC’s proposed ERO policy, which would allow respondents who settle early in the disciplinary process to receive lighter sanctions, provided that certain conditions are met.

Yet the group also said it remains opposed to this policy, as it allows for sanction discounts “in circumstances where there is not full disgorgement of any profits made and full compensation paid to investors for any losses.”

FAIR Canada said that eligibility for both the MCP and the ERO should be conditional on clients being fully compensated for their losses, and disgorgement of the revenues earned from the misconduct.

The organization noted in its letter that its views on the SRO’s proposals are also shared by other investor advocacy groups, such as the Small Investor Protection Association (SIPA) and Kenmar Associates.

IIROC proposed the latest version of the new programs in April, and the comment period ends July 24.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.