Disciplines

In Canada the regulators are charged with the disciplining of securities dealers and registered representatives. In the securities industry the provincial regulators are responsible and they have delegated some of that responsibility to the self regulatory authorities (SROs) including the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA). With this delegation of authority many of the registered representatives who sell financial products are regulated by the SROs. 

The regulators audit the operation of securities dealers and when investigations reveal the possibility of breach of rules hearings may be arranged. If the firms are found to have breached the rules they may be disciplined. The disciplinary action may include fines, restrictions, suspension, or termination. 

However, the audit does not appear to include the activities of the registered representatives. The discipline of registered representatives appears to be a complaint driven process. When a complaint is received by the regulators, they may investigate that complaint.

If the investigation into a complaint against a registered representative (RR) reveals sufficient evidence a hearing may be held. The hearings are often open to the public and notices of hearings are provided by the regulators. If the hearing finds sufficient evidence of rule breaching, the RR may be disciplined. Disciplinary action includes reprimands, restrictions, fines, suspension or termination.

The details of disciplinary action are defined in Settlement Agreements to which both parties agree, and are not handed down as a judicial decision. 

The regulators do not have a mandate to order restitution. Therefore a complaint to the regulators will not result in getting your money back. However, it will alert the regulators and if your complaint results in disciplinary action, there will be a record that will help to alert other investors. 

The exposure of disciplinary actions should help to provide incentive to registered representatives to treat their clients properly and not breach the rules. It is unlikely that the fines levied will act as a deterrent as they generally are not significant when compared to the commissions gained by the violators.

Copies of disciplinary bulletins are available at the regulators and in some major reference libraries. The regulators are now issuing press releases with some of the details of disciplinary actions.

Although the disciplinary process does not get investors' money back, it does provide a deterrent to registered representatives and does alert investors about those who have already been disciplined, and the dealers who have been disciplined for failure to supervise their sales representatives.

It should be noted that this process takes time and often several years pass before the perpetrators of financial crime and wrongdoing are detected and disciplined. Therefore it is essential that investors monitor their accounts and be alert for any signs of wrongdoing. Insisst upon monthly reports that show investment performance as measured against an acceptable benchmark.