FAIR Canada opposes the proposals of the Investment Industry Regulatory Organization of Canada (IIROC) for alternative forms of discipline to address rule contraventions committed by individuals who work in specific roles requiring registration under securities laws (Approved Persons), referred to as the Minor Contraventions Program (MCP) and Early Resolution Offers (ERO). FAIR Canada is disappointed that its earlier comments and recommendations provided to IIROC and the Ontario Securities Commission (OSC) in May 2018 have not been adopted nor its concerns with the proposals addressed.
There is no requirement for eligibility to use the MCP or ERO proposals that there be compensation for client losses, including commissions, interest and fees, and disgorgement of any profits the Approved Person and the Dealer Member earned as a result of the rule contravention. The MCP proposal will result in no publicly accessible registration database record of rule contraventions committed by an Approved Person and sanctions imposed by IIROC under MCP. Rather a no-names quarterly and annual report issued by IIROC staff will be the only public record. There will be very limited and restricted ability for the public, including any client harmed by the rule contravention, to determine whether IIROC staff appropriately applied the criteria for using MCP in any particular case.
IIROC is a public interest regulator carrying out delegated regulatory authority pursuant to orders issued by the OSC and other provincial securities regulators. In order to achieve transparency and ensure public confidence, FAIR Canada recommends that IIROC apply open court principles of law to hearings to consider any proposed settlement of enforcement matters whether pursuant to MCP, ERO or otherwise.
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