On May 16, 2019, the Investment Industry Regulatory Organization of Canada (IIROC) published its 2018 Enforcement Report (the Report). The Report summarizes IIROC’s enforcement activities in 2018 and provides an update on the progress of IIROC’s enforcement priorities, chief among which has been the strengthening of IIROC’s legal authority and enforcement powers across Canada.
IIROC conducted 127 investigations in 2018, 40% of which resulted in prosecutions. The number of prosecutions increased from 44 in 2017, to 52 in 2018. Of those 52 prosecutions, 42 were against individuals and 10 were against firms. Ontario had the most investigations and prosecutions, with 77 and 26 respectively. British Columbia had the next highest number, with 20 and 9 respectively.
With respect to sanctions in 2018, the Report indicates that IIROC suspended 21 individuals, permanently barred five individuals from working in a registered capacity, and imposed financial penalties against individuals totalling $3.2 million. According to the Report, IIROC also terminated two firms and imposed almost $1 million in financial penalties against firms. Although IIROC imposed fewer sanctions against firms than individuals in 2018, 85.3% of the total fines received by IIROC were collected from firms.
According to the Report, strengthening its legal authority across Canada remained a key priority for IIROC in 2018. IIROC intends to acquire a “full enforcement toolkit” in each Canadian province and territory. For IIROC, a “full enforcement toolkit” means (i) the legal authority to collect fines, (ii) the legal authority to collect and present evidence, and (iii) statutory immunity for IIROC and its personnel when acting in the public interest. IIROC has now obtained a full enforcement toolkit in four Canadian provinces (Alberta, Quebec, PEI and Nova Scotia), and, in 2018, made significant progress in several other jurisdictions.
Legal Authority to Collect Fines
In 2018, IIROC acquired the legal authority to collect fines through the courts in six additional provinces and territories: Nova Scotia, Northwest Territories, Nunavut, Yukon, Manitoba and British Columbia. According to the Report, although firms and individuals who wish to remain IIROC Dealer Members or registrants must pay their fines, many choose to avoid payment by leaving the securities industry and abandoning their registration. The authority to collect fines in the courts is intended to address this problem.
Saskatchewan was added to this list of jurisdictions in 2019. As a result, IIROC can now collect fines through the courts in every province and territory except New Brunswick and Newfoundland and Labrador.
Legal Authority to Collect and Present Evidence
IIROC also made progress in 2018 by acquiring legal authority to collect and present evidence for disciplinary proceedings from six additional provinces and territories: Northwest Territories, Nunavut, Yukon, Quebec, Nova Scotia, Prince Edward Island (PEI). Although IIROC can compel the cooperation of individual registrants and Dealer Members, without specific authority IIROC cannot force other individuals and entities to cooperate, even if they have relevant evidence. Before 2018, only two provinces had granted IIROC the authority to collect evidence from non-regulated parties. As a result of legislative changes in 2018, IIROC can now collect evidence and compel cooperation in every Canadian province except British Columbia, Saskatchewan, New Brunswick, Newfoundland and Labrador, and Ontario.
Statutory Immunity and Protection
Finally, in 2018, IIROC succeeded in obtaining statutory immunity protection in four additional provinces. IIROC is seeking statutory immunity for good faith performance of its regulatory functions because IIROC believes that such immunity is necessary to allow IIROC and its personnel to take appropriate regulatory action in the public interest without fear of reprisal. Alberta was the first Canadian province to grant IIROC this type of protection in June 2017. With the legislative developments in 2018, IIROC now has statutory immunity protection in Alberta, Manitoba, Quebec, Nova Scotia, and PEI.
The author would like to thank Lauren Rennie, Summar Law Student, for her contribution to this article.