1. REGULATORS
-CANADIAN SECURITIES ADMINISTRATORS (CSA)
Umbrella organization of Canada’s ten provincial and three territorial securities regulators designed to improve, coordinate and harmonize regulation of the Canadian capital markets.
-SELF-REGULATORY ORGANIZATIONS (SRO)
Canadian SROs include the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA).
-THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA (IIROC)
IIROC oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.
Financial compliance, Business conduct compliance, Registration, Enforcement, Market surveillance
-THE MUTUAL FUND DEALERS ASSOCIATION (MFDA)
The MFDA is the mutual fund industry’s SRO responsible for regulating the distribution and sales of mutual funds by its members in Canada
-THE OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS (OSFI)
independent agency of the Government of Canada designed to contribute to the safety and soundness of the Canadian financial system.
-INVESTOR PROTECTION FUNDS
The securities industry offers the investing public protection against loss as a result of the financial failure of any firm in the self-regulatory system.
-CANADIAN INVESTOR PROTECTION FUND (CIPF)
The primary role of the CIPF is investor protection; its secondary role is overseeing the self-regulatory system.
-MUTUAL FUND DEALERS ASSOCIATION INVESTOR PROTECTION CORPORATION (MFDA IPC)
Provide protection for eligible customers of insolvent MFDA member firms.
-CANADA DEPOSIT INSURANCE CORPORATION (CDIC)
Federal Crown Corporation that provides deposit insurance and contributes to the stability of Canada’s financial system.
-PROVINCIAL INSURANCE CORPORATIONS
Protect the deposits of credit union members.
2. REGULATION AND SUPERVISION
-REGULATION
Consumer protection, Fairness, Economic stability, Social objectives
-PRINCIPLES-BASED REGULATION
The regulators set objectives for securities dealers and allow the firms themselves to decide how best to meet those objectives.
-SECURITIES REGULATION IN CANADA
In Canada, there is no federal regulatory body for the securities industry, unlike in the United States, where the national Securities and Exchange Commission (SEC) has considerable regulatory authority.
Protection flows from the SROs, as well as from the provincial and territorial regulatory authorities.
-DISCLOSURE
Full, true, and plain disclosure.
Methods to protect investors:
• Registration of securities dealers and advisors
• Disclosure of facts necessary to make reasoned investment decisions
• Enforcement of the laws and policies
-NATIONAL REGISTRATION DATABASE (NRD)
Web-based system used by investment dealers and employees to file registration forms electronically when applying for approval by a stock exchange, the CSA, or IIROC.
-GATEKEEPER
• Collect and record client information that is accurate and complete.
• Monitor activity in client accounts.
• Report any suspicious transactions or proposed transactions in client accounts.
-KNOW YOUR CLIENT (KYC)
• Learn the essential facts relative to every client and to every order or account accepted.
• Verify that the acceptance of any order for any account is within the bounds of good business practice. • Verify that recommendations made for any account are appropriate for the client’s investment objectives, personal circumstances, and tolerance to risk.
-CLIENT RELATIONSHIP MODEL (CRM)
The objective is increased transparency for investors regarding the fees they pay, the services they receive, potential conflicts of interest, and the performance of their accounts.
-RELATIONSHIP DISCLOSURE
• The types of products and services offered by the firm
• The terms of the account relationship to which the client has consented
• The process used by the firm to assess investment suitability and the client’s KYC information
• The date on which account suitability will be reviewed
• All fees and charges associated with operating, transacting, and holding investments in the account
• The firm’s complaint handling procedures
-CONFLICT OF INTEREST MANAGEMENT
• Avoiding the conflict
• Disclosing the conflict
• Otherwise controlling the conflict situation
-SUITABILITY ASSESSMENT
• A trade is accepted.
• A recommendation is made.
• Securities are transferred or deposited to an account.
• There is a change of representative or portfolio manager responsible for the account.
• There is a material change to the KYC information for the account.
3. REMEDIATION
-ARBITRATION
• Attempts have been made to resolve the dispute with the investment dealer.
• The claim does not exceed $500,00
-OMBUDSMAN FOR BANKING SERVICES AND INVESTMENTS (OBSI)
This organization investigates customer complaints against financial services providers, including some banks and other deposit-taking organizations, investment dealers, mutual fund dealers, and mutual fund companies. OBSI is independent of the financial services industry.
4.ETHICAL STANDARDS
EXEMPLES
• Deceiving the public, the buyer, or the vendor as to price of any transaction or the value of any security
• Creating, or attempting to create, a false or misleading appearance of active public trading in a security in an effort to make a profit
• Entering, or attempting to enter, into any arrangement to sell and repurchase a security in an effort to manipulate the market
• Making a fictitious trade that involves no change in the beneficial ownership of a security in an effort to mislead the public
• Using high-pressure or otherwise undesirable selling techniques
• Violating any statute applicable to the sale of securities
• Misleading a client as to the risk involved in purchasing a specific security
• Trading in one’s own account before effecting the same trade for a client (a practice known as front running)
• Conducting oneself in a way that would bring the securities business, the exchanges, or IIROC into disrepute
-PROHIBITED SALES PRACTICES
Such regulations are designed to curb unethical behaviour, dishonest conduct, and high-pressure selling tactics.
NATIONAL DO NOT CALL LIST (DNCL)
The DNCL rules prohibit telemarketers and clients of telemarketers from calling any number that has been registered on the DNCL for more than 31 days.