Protecting investors through regulatory evolution and harmonization  

TORONTO, July 16, 2024 /CNW/ - The Canadian Investment Regulatory Organization (CIRO) released its 2023-2024 Enforcement Report. The report underscores CIRO's continued commitment to investor protection, improving industry standards, and strengthening market integrity through fair, timely and effective enforcement actions.

In 2023-2024, the Enforcement team continued integration and evolution by: 

• Adopting harmonized Sanction Guidelines and Enforcement Staff Policy Statements, effective February 1, 2024, promoting the fairness and transparency of the enforcement process.
• Establishing a new centralized intake process for all public complaints and inquiries, simplifying access for investors.
• Unifying decision-making across investment dealer and mutual fund rule cases to ensure consistency throughout the enforcement process.

We are also commencing work on harmonizing key enforcement systems and technologies of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).

"This year's report reflects our unwavering commitment to protecting investors and enhancing market integrity amidst the challenges of regulatory evolution," said Elsa Renzella, Senior Vice-President, Enforcement and Registration. "We have made substantial progress in streamlining and modernizing regulatory systems, unifying enforcement decision-making, and improving industry standards. This ensures we focus our finite resources on cases that have the greatest deterrent impact and the strongest regulatory message."

Selected Case Highlights:

The cases highlighted in this year's report represent CIRO's commitment to protecting investors from unfair, improper, or fraudulent practices by Dealer Members, to foster fair and efficient capital markets, and to promote market integrity, ultimately working to enhance public confidence in Canada's capital markets.

• Fortrade Canada was fined $2 million CAD for making prohibited recommendations for contracts for difference to unsophisticated retail clients. As an order execution-only dealer, Fortrade violated regulations by providing recommendations. The firm also failed to maintain a proper supervisory system and retain necessary records. In November 2022, Fortrade agreed to settle the proposed proceeding, agreeing to pay $703,479 USD to clients who complained and establishing a $6 million USD fund for clients with net losses. Fortrade has implemented remedial measures to prevent future issues. The hearing panel highlighted the importance that returning funds to affected clients played in the decision to accept the settlement.
• BMO Nesbitt Burns was fined $1.5 million and ordered to disgorge $146,876 for failing to implement a proper supervisory system regarding the high-risk trading strategy of its registered representative, Yujie Liu. Liu's strategy involved clients investing and borrowing to invest in preferred shares by short selling Government of Canada bonds. BMO failed to detect suitability issues in a timely manner and ensure Liu and supervisors adhered to policies regarding client account suitability. The hearing panel emphasized that the significant fine serves as a strong deterrent to BMO, Liu, and the industry. BMO has since implemented measures to prevent future failures.

"Our commitment to fair, effective, and timely enforcement has deepened, fostering greater trust in investment dealers and the industry across Canada," said Renzella. "We thank our valued stakeholders, including industry and investor organizations, the Canadian Securities Administrators (CSA), and their provincial and territorial governments, as well as other regulatory authorities with whom we collaborate to close gaps in the system."

In 2023, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) merged to form the Canadian Investment Regulatory Organization (CIRO), resulting in the unification of their dedicated Enforcement teams.  

Read the full 2023-2024 Enforcement Report on ciro.ca.

About CIRO  

The Canadian Investment Regulatory Organization (CIRO) is the national self-regulatory organization that oversees all investment dealers, mutual fund dealers and trading activity on Canada's debt and equity marketplaces. CIRO is committed to the protection of investors, providing efficient and consistent regulation, and building Canadians' trust in financial regulation and the people managing their investments. For more information, visit www.ciro.ca.  

SOURCE Canadian Investment Regulatory Organization (CIRO)