MFDA censure and single regulator top 2011

By Philip Porado | December 20, 2011 | Last updated on December 20, 2011
5 min read

As you might expect during a year following one financial crisis and during which another reared its head, 2011 saw more than its fair share of regulatory activity.

The year started out with twin regulatory shudders.

First, the MFDA responded to a British Columbia Securities Commission condemnation over the use of SRO staff to solicit proxy votes from MFDA members, ahead of a controversial vote that would extend the term limits for its board of directors. That vote took place at the annual general meeting in December 2008, prompting Partners in Planning to file a formal complaint saying the staff action could be construed as pressure to approve the amendment.

Then, the chair of the global CFA Institute advocated major changes in Canada’s regulatory regime. Marg Franklin called for a complete overhaul of the RCMP Integrated Market Enforcement Teams and said a single federal regulator would also improve protections for investors. Other critics pointed to underfunding as the root cause of regulatory ineffectiveness.

Major world organizations, including the International Monetary Fund, also raised questions about the soundness of Canada’s securities and banking oversight. The two major SROs, IIROC and the MFDA, later announced plans to team up on the development of a list of disciplined brokers and advisors. IIROC also made changes to its arbitration program that increases award amounts for complainants.

Adoption of a single market regulator, long discussed as a change agent to mitigate existing arbitrage, gained some traction during 2011; even as British Columbia openly joined Quebec and Alberta in their opposition to the federal mandate. Albertan Bill Rice’s assumption of the top job at CSA, which is charged with smoothing interprovincial rule differences, did little to sooth matters. And the CSA’s review of IIROC’s operations gave the self-regulatory organization a clean bill of health.

Others voiced the belief that advisors could cover off the work of regulators if they took their duty of care obligations to clients seriously. Fee transparency was also debated at length, but no signs emerged that advisors were prepared to drop commissions just yet.

Short selling got its day in the sun when IIROC sought comment on its universal market integrity rules, which govern the practice. CFAs cited derivatives as the most dangerous instruments being deployed by traders; and the CSA sought comments on how markets should handle them. New accounting and reporting standards also threaten new headaches for product manufacturers and distributors going forward.

Insurance regulators started the year with an issues paper saying they’d take a hard look at the activities of MGAs. Comments were also requested on how banks should operate within the insurance space. Both issues are still at the debate and blue ribbon commission stage.

An attempt by the London Stock Exchange to buy the TSX had its share of regulatory scrutiny, but was ultimately scuttled by vocal opposition.

Not all the 2011 rule changes were harsh. Banks and other financial institutions saw a relaxation of rules related to electronic communication with customers as well as the movement of client documents online. IIROC also gave its okay to certain uses of social media networking services by registered investment advisors. Neither set of changes, however, usurps requirements currently in place at companies; those must be altered on a case-by-case basis.

And, as advisors and distributors struggled with how they’d cope with point of sale requirements, the CSA deemed that delivery of the fund facts document would satisfy the spirit of the regulation.

2011 also saw a larger than normal tally of disciplinary actions from both IIROC and the MDFA:

IIROC sets penalty against Blackmont Capital, DukeIIROC slaps ex-advisor with $1 million fineIIROC levies $1 million fineIIROC fines Connacher half a millionOutside business activity fine tops $320,000IIROC levies $300,000 sanction on advisorKYC failure costs advisor $27,000Supervisory lapse costs $25,000 finePersonal dealings fine costs advisor $25,000Suitability lapse costs $23,000IIROC levies $10,000 fine for client pay-offIIROC releases decision, penalty for ShamseerPenalties in artificial bid caseIIROC announces settlement with Mary Louise Kasten-BrownIIROC settles with Allan Mansfield BushIIROC finds against Brian Vaughn WilsonIIROC reaches decision for Ronald StoneburgIIROC settles with All Group Financial ServicesIIROC settles with Paul Ryan KlemkeIIROC settles with National Bank FinancialIIROC settles with Paul Clarke, Todd O’ReillyIIROC settles with Gateway SecuritiesIIROC settles with Credit Suisse SecuritiesIIROC releases decision for DennisIIROC settles with Gary John WilliamsonIIROC announces settlement with Richard RoyIIROC announces penalty for Dale Richard WellsIIROC settles with National Bank Direct BrokerageIIROC sets penalty for Cooney, Jory CapitalOntario Court of Appeal refuses Berry appealIIROC settles with Todd William StefiukIIROC sets penalty for Benarroch, Kent, Glover and Credifinance SecuritiesIIROC fines, bans Michael Thomas JonesIIROC sets penalty against O’NeillIIROC announces decision for Bryan Dale ClaggettIIROC settles with Maison PlacementsIIROC settles with Beacon SecuritiesIIROC bans, fines Marcel Anil RadaIIROC settles with Donald Dean MackenzieIIROC announces decision for David Bruce ConnacherIIROC fines Cornacchia, Northern SecuritiesIIROC settles with Konstantinos Georgeos ArapisIIROC fines CIBC World MarketsIIROC finds against Jean-Luc BeaudoinIIROC finds against Natalie St-AmantIIROC rules against Melaney PhillipsIIROC clears Christos Orestes IliasIIROC settles with Allan Mansfield BushIIROC settles with Elizabeth Maureen MorrisonIIROC settles with Morgan Stanley CanadaIIROC sets penalty hearing for Melaney Phillips MFDA accepts settlement with LambrosMFDA accepts settlement with Pan ChenMFDA issues reasons for decision on Excel Financial GrowthMallard wins a round in fight with regulatorsMFDA makes findings against Sergio GizzoMFDA makes findings against JonesMFDA settles with Calogero ArcuriMFDA makes findings against Michael FrancoMFDA to hear Laurier Capital Planning settlementMFDA issues reasons for decision in Gabrielson caseMFDA issues reasons for decision in Fanelli, Torchia casesMFDA accepts settlement with Victor LeeMFDA makes findings against SmithMFDA finds against Tadeusz BytnarMFDA issues reasons against Calogero ArcuriMFDA issues reasons against Partners In PlanningMFDA settles with Connor Financial, Joel ConnorMFDA issues reasons against Zenon SmiechowskiMFDA issues reasons for Jones decisionMFDA issues reasons in three casesMFDA issues reasons for decision against SmithMFDA settles with Laurier Capital PlanningMFDA settles with Gillian Gibson-SargeantMFDA finds against Wijaysri SivasubramanianMFDA issues reasons in Bytnar caseMFDA issues decision, reasons in Ryan caseMFDA issues reasons in matter of Chris McAuleyMFDA accepts settlement with Sentinel FinancialMFDA accepts deal with Queensbury StrategiesMFDA finds against Douglas WellingsMFDA rules against DicksonMFDA finds against Carmel Toussaint

Philip Porado