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The body that regulates investment dealers has abandoned plans for a new disciplinary program for minor offences, after pushback from investor advocates as well as concerns from the industry.

The Investment Industry Regulatory Organization of Canada said Thursday that it was withdrawing a proposal first made in 2018 for a “minor contravention program,” or MCP, in which individual advisers could admit to wrongdoing in matters where investors had not been harmed and pay a standard $5,000 fine, avoiding a full hearing. Advisers who admitted to the minor violation would not have had the infraction placed on their formal disciplinary record, and the public notice of the misconduct would remain anonymous.

The Canadian Foundation of Advancement of Investor Rights and the Ontario Securities Commission’s investor advisory panel expressed objections to the plan, particularly to the anonymity provisions. “How can IIROC assert this proposal is in the public interest when the public – the stakeholder group often most directly impacted by the wrongdoing – is kept unaware of each MCP sanction?” the OSC panel wrote in its letter.

Thursday, IIROC explicitly acknowledged those comments in its notice of withdrawal. It also noted public comments that “the criteria for pursuing a matter under the MCP as opposed to a formal disciplinary proceeding were not sufficiently clear and did not provide certainty as to its applicability,” which was suggested by trade group Investment Industry Association of Canada in its comment letter.

IIROC said it’s pulling the proposed rules “in order to fully consider and address these concerns.”

Investor advocate Ken Kivenko of Kenmar Associates said “there were valid concerns on both sides” but is sad to see it dropped. “We weren’t destructively critical; we felt they were close. I hope they resurrect it.”

IIROC said Thursday it will, however, proceed with another portion of its plan: “early resolution offers,” in which investment firms and advisers would settle certain cases earlier in the enforcement process with reduced fines and no full hearings.

IIROC is a self-regulatory organization, with industry participation, that investigates and prosecutes firms and investment advisers that breach its rules. Major infractions could include misappropriating funds from clients, falsely endorsing client signatures or making unsuitable recommendations to investors – none of which would have been subject to the minor contravention program.

Currently, disciplinary actions are resolved in a settlement or a contested hearing. IIROC hoped the two proposed programs would allow it to address matters more quickly and efficiently.

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