EMDs must fix regulatory deficiencies, says OSC

The Ontario Securities Commission has released findings of its recent targeted review of portfolio managers and exempt market dealers.

It launches the review to assess compliance with important regulatory requirements, such as know-your-client, know-your-product and suitability obligations of these registrants.

The OSC says they’re under its direct oversight and the sweep was critical in highlighting regulatory breaches.

Read: Don’t get caught in regulatory traps

The review began in June 2012 and looked at a total of 87 managers and EMDs. To date, it’s the largest targeted review conducted by the Compliance and Registrant Regulation Branch of the OSC.

Its staff identified a number of deficiencies, specifically around the sale of exempt securities to non-accredited investors. Reps are relying on purported client-directed trade instructions, as well as on the inadequate processes for the collection, documentation and maintenance of KYC information.

Read: IIROC to focus on KYC, risk management

“Know-your-client, know-your-product and suitability determinations are fundamental obligations owed by registrants to their clients,” says Howard Wetston, Q.C., chair and CEO of the OSC.

He adds, “Enhancing compliance among portfolio managers and exempt market dealers is critically important and we are taking appropriate regulatory action where we identified significant compliance issues.”

Of the registrants reviewed, most were issued deficiency reports and staff will monitor for corrective action, conduct follow-up reviews and take further regulatory action as appropriate.

Read: How to survive regulatory audits

The results of the review are set out in OSC Staff Notice 33-740. Registrants should use it as a self-assessment tool.

The OSC will also be issuing guidance to registrants over the next several months, which will include best practices and highlight examples of unacceptable practices.

Read: Many firms not ready for regulatory changes

Staff

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