CIRO's latest report details efforts to protect investors, enhance standards, and strengthen market integrity
The Canadian Investment Regulatory Organization (CIRO) released its 2023-2024 Enforcement Report.
The report emphasizes CIRO's ongoing dedication to investor protection, enhancing industry standards, and strengthening market integrity through fair, timely, and effective enforcement actions.
In 2023-2024, the Enforcement team advanced its integration and evolution efforts by:
- Implementing harmonized Sanction Guidelines and Enforcement Staff Policy Statements from February 1, to ensure fairness and transparency in the enforcement process.
- Introducing a centralized intake process for all public complaints and inquiries to simplify investor access.
- Standardizing decision-making across investment dealer and mutual fund rule cases to maintain consistency throughout the enforcement process.
CIRO is also working on harmonizing key enforcement systems and technologies from 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,” stated 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.”
The report features selected case highlights, showing CIRO's efforts to protect investors from unfair, improper, or fraudulent practices by Dealer Members, fostering fair and efficient capital markets, and promoting market integrity to boost public confidence in Canada's capital markets.
Fortrade Canada received a $2m fine for making prohibited recommendations for contracts for difference to unsophisticated retail clients.
As an order execution-only dealer, Fortrade violated regulations by providing recommendations and failing to maintain a proper supervisory system and necessary records.
In November 2022, Fortrade settled the proposed proceeding, agreeing to pay US$703,479 to clients who complained and establishing a US$6m fund for clients with net losses. The company has since implemented measures to prevent future issues.
The hearing panel noted the importance of returning funds to affected clients in their decision to accept the settlement.
BMO Nesbitt Burns was fined $1.5m 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 did not detect suitability issues in a timely manner or ensure Liu and supervisors adhered to client account suitability policies.
The hearing panel stressed that the significant fine serves as a strong deterrent to BMO, Liu, and the industry. BMO has since taken steps 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, IIROC and the MFDA merged to form CIRO, resulting in the unification of their dedicated Enforcement teams.
