On February 22, 2018, the Investment Industry Regulatory Organization of Canada (IIROC) announced that it was launching a public consultation on two new disciplinary approaches for dealing with minor violations of IIROC rules and the resolution of disciplinary cases.
IIROC’s Enforcement Department is specifically responsible for enforcing IIROC’s Dealer Member Rules relating to the sales, business and financial conduct of its Dealer Members and their registered employees, as well as the Universal Market Integrity Rules (UMIR) relating to the trading activity on all Canadian debt and equity marketplaces. Under the current regime, a respondent faced with IIROC disciplinary proceedings has two options: either settle the case before a disciplinary panel or have a full disciplinary hearing, which can result in significant fines, suspensions and permanent bans.
According to IIROC, the proposed new approaches would provide IIROC with added tools and flexibility to more fairly address varying degrees of rule breaches in order to focus resources on matters that are more serious and/or harmful to investors. With these changes, IIROC hopes that disciplinary cases will be resolved more quickly and in a manner that is more proportionate to the offenses in question. Currently, a typical disciplinary case that proceeds from investigation through to the disciplinary process can take a year or more to complete. IIROC expects that the new programs will allow for quicker, more efficient resolution of certain disciplinary cases.
In particular, IIROC is considering two new disciplinary programs:
- A new Minor Contravention Program (MCP) under which an Approved Person or Dealer Member would agree to the imposition of a sanction for rule contraventions that are deemed minor. The MCP would provide a more efficient means to resolve cases that cannot be adequately addressed by way of a Cautionary Letter but do not warrant formal disciplinary action; and
- The use of Early Resolution Offers to conclude settlement agreements at an earlier point in the enforcement process to promote the efficient resolution of cases, increase the application of the IIROC Staff Policy Statement on Credit for Cooperation, and encourage firms to take remedial measures and address investor harm through voluntary acts of compensation.
IIROC is encouraging stakeholders to review and comment on these proposals. To supplement and engage a broader representation of stakeholders, IIROC will consult directly with Canadian investors to get their views on the proposed alternative forms of disciplinary action. Under its current Strategic Plan, IIROC has committed to actively consulting with retail investors on key policy issues. In line with that commitment, IIROC has established an online pool of 10,000 Canadian investors, from which it consults on key proposals to better understand their needs, experiences and perceptions. IIROC has stated that it intends to draw on a subset of this pool to solicit input on this proposal from retail investors across Canada.
Following the close of the 90-day comment period, IIROC intends to draft a consolidated response to the written comments received and, where appropriate, revise the proposals to address the comments received. IIROC also intends to publish the results of the investor survey. Finally, IIROC staff may also consider inviting those who submit comments to a meeting to discuss issues related to the adoption and implementation of the proposals. Any comments should be made in writing and delivered by May 23, 2018.