Firms inadequately collecting KYC information on seniors: OSC

A number of portfolio manager and exempt market dealer firms are inadequately collecting and documenting KYC information on seniors, the OSC says in a report released Thursday.

The “Annual Summary Report for Dealers, Advisers and Investment Fund Managers” gives an overview of the findings from compliance reviews done during the 2017-2018 fiscal year. One was a review of 20 portfolio manager and 10 exempt market dealer firms that provided “investment advisory services or sales of products” to a significant proportion of clients over the age of 60, the report says.

The review found that 57% of the firms inadequately collected and documented KYC information, including information pertaining to risk tolerance, time horizon and investment knowledge.

Read: OSC to hold roundtable on proposed derivatives registration

“Most of the firms and their representatives were able to demonstrate that these were documentation issues rather than a general lack of understanding of their senior clients’ investment needs and objectives,” the report says.

The report found firms used the same KYC process for seniors and other clients. For example, the frequency of the KYC updates and type of KYC information collected were the same regardless of age. The OSC reminded firms to consider a client’s age when collecting KYC information.

The regulator found some firms were proactive in discussing the potential use or existence of a power of attorney and obtaining the names and contact information for family members or third party representatives during the onboarding process even if the client didn’t appear to have any mental capacity or health issues.

The report also found deficiencies related to relationship disclosure information. The deficiencies were a result of client documents that didn’t contain enough information or included incorrect or outdated information. In some instances no document or disclosure was provided.

OSC’s CRM2 review found some firms were not giving their clients the required client statements, compensation reports and performance reports, the report says.

Increased regulatory action

The report found that the OSC’s Compliance and Registrant Regulation branch took 136 regulatory actions in 2018, compared to 126 in 2017 and 87 in 2016. Of the 136, denial of registration was imposed in 63 cases. Only four were referred to enforcement and five led to suspensions.

The report also highlights current issues and trends in registration and key policy initiatives affecting registrants.

Read the report here.

Also read:

Fine increased to $50K for former first Leaside CFO after OSC review

IIROC’s 2019 priorities include seniors, innovation