Investment advisers who don’t serve their Nunavut clients’ best interests may now be taken to court by the Investment Industry Regulatory Organization of Canada (IIROC) to collect fines.
The Government of Nunavut recently granted IIROC the legal authority to use the territory’s Supreme Court to go after investment advisers who face financial penalties.
“We are now in a better position to enforce our disciplinary actions, holding wrongdoers accountable and sending a strong message of deterrence to those who might consider taking advantage of investors,” said Elsa Renzella, IIROC’s senior vice-president of enforcement and registration. “The message is clear: if you abuse your clients’ trust, you will face serious consequences.”
Several provinces had already given IIROC that legal authority and the rate of fine collections is higher in those jurisdictions, Renzella said. Since 2008, IIROC has only been successful in collecting 20 per cent of fines nationally from individuals. However, that rate jumps to 26 per cent in Alberta and 39 per cent in Quebec, where courts are an avenue for enforcement.
Previously, IIROC’s primary methods of compelling investment advisers to pay penalties was to threaten to suspend their registration with the national self-regulatory organization – registration that is compulsory for investment professionals. IIROC also published an unpaid fines report on its website.
Among the more common complaints that IIROC hears is investment advisers making unsuitable investment recommendations to clients. In instances where criminal activity is involved, IIROC involves the police and the territorial securities commission, Renzella said, adding that investors also have the right to file civil lawsuits against investment advisers.
“If a client of one of our advisers feels they’ve been aggrieved or they’ve lost funds and take issue, they certainly can complain to us. We’ll investigate the matter and ensure the rules have been followed,” she said. “By the same token, the individual can make the decision to launch a civil action.”
Across Canada, IIROC levied more than $4.4 million in penalties against investment advisers and firms last year. Although there have been no fines imposed against investment advisers in Nunavut over the past few years, “investor protection should remain a concern regardless of geographical location,” Renzella said.
“We want to ensure consistent protection from province to province – coast to coast – and all the territories,” she said. “To me what’s important is ensuring we have these tools, including fine collection, even before a case crystallizes.”
IIROC has offices in Toronto, Montreal Calgary and Vancouver. It is the latter office that generally oversees investment matters in Nunavut.