A national investment industry regulator is making headway in its ability to gain greater investigative power in the battle for investor protection.
Manitoba's Minister of Finance Cameron Friesen introduced legislative amendments on Monday to the Securities Act (Manitoba) that would grant the Investment Industry Regulatory Organization of Canada (IIROC) the legal ability to enforce through the courts its fines against individuals that engage in misconduct, sending a strong deterrent message to potential wrongdoers.
IIROC oversees approximately 160 investment dealers and their trading activity in Canada's debt and equity markets. The securities regulator investigates and prosecutes firms and investment advisers who breach its rules. Such infractions could include misappropriating funds from clients, falsely endorsing client signatures or making unsuitable recommendations to investors – which are commonly seniors and vulnerable investors who suffer significant financial losses.
In addition, IIROC will also now receive protection against malicious lawsuits while acting in good faith to carry out its public interest mandate to protect investors in Manitoba.
Canadian regulators have fined these wrongdoers millions in the past, but they rarely collect from the most egregious offenders. A recent investigation by The Globe and Mail determined that the amount of unpaid securities fines in Canada is more than $1.1-billion, a massive figure that shows that many of these sanctions are being ignored among white-collar criminals and fraudsters.
"We thank the Minister of Finance and the Government of Manitoba for taking this important step to enhance investor protection – particularly for seniors who rely heavily on their retirement investments and represent the largest number of complaints we receive," Andrew Kriegler, IIROC's president and CEO, said in a statement. "By introducing these legislative changes, the Manitoba government is demonstrating it is serious about protecting investors and putting wrongdoers on notice that, if you break the rules and abuse the trust of your clients, you will pay the price and be held accountable."
This is the second province to make such legislative changes.
Last fall, Alberta became the first province to amend its securities act, with the passage of Bill 13 – providing IIROC with more legal authority during investigations and protection against malicious lawsuits during the process.
In both provinces, regulators will be able to identify possible offenders – individual advisers or investment firms – that it wants brought before a hearing on a more timely basis – as well as start collecting evidence on these alleged wrongdoers immediately – as opposed to having to wait to gather evidence in hearings. In addition, IIROC will be able to ask people who are not registered with IIROC to co-operate either by providing testimony or by providing documents.
IIROC is hoping other provinces will follow suit and bring a level of consistency of protection across all provinces.
Currently, in Quebec, Ontario and Prince Edward Island, IIROC has the authority to pursue the collection of disciplinary fines directly through the courts. In PEI, IIROC also has legal authority to collect evidence during the disciplinary hearing stage.
In 2017, IIROC completed 127 investigations and 44 prosecutions with more than $4.4-million in sanctions imposed coast-to-coast.
With files from Grant Robertson and Tom Cardoso