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Alberta Securities
Commission report highlights 'deficiencies' at IDA office |
Aug 1, 2007 18:18
By Laura Bobak
TORONTO (CP) _ The Alberta Securities Commission has issued a scathing
report detailing "significant deficiencies'' at the prairie regional
office of the Investment Dealers Associations of Canada.
The commission's oversight review, issued this week, details a range of
issues including; staffing levels, supervision, lack of training, high
turnover, a lack of internal communication, a lack of available
hearing panels, and a lack of consistency between investigations.
Of particular concern to the commission is a lack of stringency in the
review process for considering new members - prospective investment
advisers dealing with the public - so that unqualified people may be
permitted to become advisers.
"The IDA seems to view registration as an administrative exercise, not
as a critical component of regulation that helps to ensure the
protection of investors,'' the ASC stated in its report, calling the
review of applicants "perfunctory.''
"In some cases the IDA may not be appropriately considering the
integrity of all individuals who apply for registration,'' the report
states.
"One instance was noted where an individual, who was sanctioned by the
IDA for 'conduct unbecoming a registered representative by engaging in
personal financial dealings with his clients,' was allowed to open a
sub-branch out of his home supervised by a branch manager located two
hours away,'' the report stated, adding the person was fined $100,000
for his infraction and placed under supervision for one year.
"The individual continued to conduct illicit activity out of the
sub-branch resulting in additional losses to clients,'' stated the
report, noting the person was later expelled from the IDA.
A consolidated report by other provincial regulators which have
undertaken a review of the IDA is expected soon, as part of a regular
review process that takes place every three years, but Alberta has
issued its report separately.
The ASC's report also highlighted two forgery cases in which one
originally resulted in a reprimand, while another, which involved a
designated person forging a signature and misleading the IDA, ended with
a warning letter.
"These two cases had similar fact patterns and yet the action take by
the IDA was inconsistent from one case to the next. Only one of these
cases was brought before a hearing panel and the settlement reached in
this case did not fall with the IDA's prescribed guidelines for
forgery,'' the ASC stated.
But the IDA said that there are two types of forgery - one that involves
fraud and another that is simply a case of a dealer filling in a missed
signature for his or her client, with the client's consent - and that
the two are dealt with differently.
In the case of the fakes signature, the IDA deems that to be a much less
serious infraction.
The report also said the lack of supervision has contributed to some of
the problems. The office is supervised by the IDA's vice-president in
British Columbia, but the ASC said it has not received enough attention.
Warren Funt, vice-president, western Canada of the IDA, said the
association takes the ASC's concerns very seriously.
"It is part of an oversight process which we encourage and accept,''
Funt said. "We take these reviews seriously because it is part of the
oversight process and we respect that process,'' Funt said.
"So if they found deficiencies, obviously we work to fix them. We don't
take it lightly.''
Funt said past reviews pointed out the good and bad, but this audit
seems to focus only on the negative aspects of the IDA's work, and
doesn't mention what it's doing right.
"In Alberta's case, it is pretty much just the negative,'' Funt said.
The ASC is the regulatory agency responsible for administering the
province's securities laws, but the IDA is expected to monitor and
investigate its own members.
"The ASC gives the IDA the authority to help regulate the investment
dealers who participate in Alberta's capital market; with that authority
comes an accountability,'' said David Linder, the commission's executive
director.
"The review helps the ASC ensure the IDA prairie office meets the
expectations and standards we set for self-regulatory organizations who
help us protect and foster a fair and efficient capital market.''
The ASC also said the IDA's timelines for conducting its investigations
aren't fast enough, with one report taking more than the maximum of 26
weeks to complete.
"Given that the benchmarks are generous, this single instance is
troubling, especially since the report raised serious compliance
issues,'' the report stated.
The IDA, in a written response to the ASC report, said it has taken the
following steps to address the ASC's concerns:
- It has hired a director for the
Calgary office this month to increase supervision, and the new director
will improve communication within the office, cited as a problem by the
ASC
- The IDA has added three full-time
staff and one part-timer to address concerns about staff turnover and
slow response times
- The association will change its
quality supervision processes to review a larger number of files
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