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Show Me The Money: Company statements

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Company statements

Regulator responses

 

RBC
We strive to provide our clients with the best advice to help them meet their financial goals. We also continually look for ways to enhance the support we provide our employees to help them give our clients the best advice possible.

 

Primerica

PFSL Investments Canada Ltd. has operated for 22 years with an unwavering commitment to clients. Our company enjoys an excellent compliance record, and we endeavour to always act responsibly in the event that an issue was to arise regarding a representative.

 

Edward Jones

Edward Jones strives for clarity when communicating fees and costs to clients.

Our advisors are fully trained to help clients achieve their financial goals. Our financial advisor training program is robust and covers all aspects of fees and commissions. In addition, our advisors follow a five-step process that helps them (the financial advisor) understand the client's goals and risk tolerance before recommending a tailored investment strategy to meet the client's need(s). During the presentation of the investment strategy, the financial advisor would provide a detailed explanation of any costs related to the recommended investments. Edward Jones is proud that our clients ranked us highest in investor satisfaction with full-service brokerage firms, according to the J.D. Power 2013 Canadian Full Service Investor Satisfaction StudySM.

Edward Jones cannot speak to a specific conversation that may have been taken out of context during the course of an introductory client meeting where no account was opened or specific investment agreed upon. To learn more about fees and costs, in addition to all services provided by Edward Jones, please see https://www.edwardjones.com/en_CA/disclosures/index.html.

 

Dundee Wealth (now called Hollis Wealth and owned by parent company Scotiabank)

Scotiabankers work hard to help our customers become better off financially. The Bank’s employees work with customers to provide the advice and solutions that best suit each customer’s needs.

Our financial advisors manage many customer inquiries daily and have a high satisfaction rating in the industry. Our advisors follow rigorous know-your-customer rules to verify clients’ personal and financial information, risk tolerance and investment objectives. This rigor underlies the “suitability assessment” required by the Investment Industry Regulatory Organization of Canada (IIROC). The compensation for our advisors reflects industry standards.

The concern raised by CBC Marketplace is an isolated incident where the CBC’s mystery shopper spoke to an advisor who would not typically manage requests of this nature. That employee made a mistake and in doing so, contravened our guidelines and industry standards. It is also important to note that further processes would have been applied if an investment had actually been initiated.

We are taking this matter seriously and reported it to IIROC. We accept responsibility for our employee’s error and have taken measures to prevent this from happening again. The employee was suspended pending further internal review.

 

Follow-up statement from Dundee, in response to additional questions from Marketplace.

Scotiabank takes this matter very seriously. We accept responsibility for our employee’s actions and have taken measures to prevent this from happening again. Our internal review is ongoing. The review will be done as quickly as possible. For employee privacy reasons, we cannot provide details of the review. We would greatly appreciate a copy of the CBC Marketplace transcript to assist our review.

 

Regulator responses

Marketplace  approached Canada's financial services regulatory agencies, and offered them an opportunity to review our undercover footage and respond in an on-camera interview. Two are publicly funded: the Canadian Securities Administrators and the Ontario Securities Commission.   The Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of are funded by their member organizations.

Canadian Securities Administrators

 

Ontario Securities Commission

Many Ontarians work with an adviser or dealer to achieve their investment goals. These registrants are obligated under securities regulation to understand the investment needs, objectives and the risk tolerance of their clients, to have a solid understanding of the products they recommend and to determine that the investment products are suitable for the client.

Securities laws impose a general duty on registrants to deal fairly, honestly and in good faith with clients. Know your client and suitability requirements (KYC) are set out in CSA National Instrument 31-103 and KYC and suitability requirements for SRO dealers members are set out in IIROC rules and MFDA policies.

The OSC expects Ontario registrants to conduct themselves in a manner that is consistent with the principles of securities regulation.

Additional Background:

The CSA recently published CSA Staff Notice 31-336 Guidance for Portfolio Managers, Exempt Market Dealers and Other Registrants on the Know-Your-Client, Know-Your-Product and Suitability Obligations which sets out expectations for registrants regarding suitability requirements.Together with our counterparts in the CSA, we are carefully considering the impact of enhanced requirements including those related to a possible best interest standard.

 

Mutual Funds Dealers Association of Canada (MFDA)

We are not able to grant your request for an on-camera interview. However, as a regulator for the retail distribution of mutual funds by mutual fund dealers the issue of advisers knowing their clients and providing suitable advice have always been areas of primary regulatory focus for the MFDA. The collection of accurate know-your-client (“KYC”) information and the provision of suitable advice are fundamental to the advisory process.

The MFDA has specific rules and policies that require Members and Approved Persons to collect detailed know-your-client information (Rule 2.2) and to ensure that Members supervise Approved Person’s adherence to Rule 2.2 (Policy 2). In addition, the MFDA has rules in place which require Members upon account opening to describe the nature of the compensation that may be paid to the Member (Rule 2.2.5) and with each transaction to inform the client of any sales charge, service charge or any other fees or charges to be deducted in respect of the transaction (Rule 2.4.4) . We have also issued guidance on Know-Your-Product (MSN – 048), Suitability and KYC obligations (MSN – 069) and Transaction Fees or Charges (MSN – 078).

Given the importance of KYC and suitability, we continue to focus on these core areas and have recently increased Member education and outreach initiatives with a focus on providing further guidance and training to Members on KYC and suitability issues with a specific focus on seniors and other potentially vulnerable clients.

 

Investment Industry Regulatory Organization of Canada

Thank you for contacting us and for the opportunity to provide commentary.

We recognize that it can be difficult to understand and navigate through the broader financial regulatory system in Canada, especially since some investment firms may be regulated by more than one body. To help investors, IIROC has created several online resources to help determine who oversees the individuals and firms they are dealing with and understand the rules they must adhere to (see below).

IIROC is committed to enhancing investor protection and to do so, we too want to gain a better understanding of, and improve the quality of advice provided to retail investors.

Last year, we announced that, together with the Ontario Securities Commission and Mutual Fund Dealers Association, we are undertaking our own Mystery Shopper program, using independent consumer experts, so that we can get first-hand knowledge about investors’ experiences.

The information we gather about investors’ experiences, combined with our oversight and surveillance program, will help to improve compliance among those we regulate. Tools we use to regulate investment dealers include policy-setting, proficiency standards, ongoing education, compliance examinations, investigating complaints and enforcement action such as fines, suspensions and expulsion.
Please find below background information that may be helpful for your audience and addresses some of your questions.

What is IIROC?

· IIROC is a national self-regulatory organization that oversees 195 investment dealers in Canada and trading activity on debt and equity marketplaces. IIROC sets high regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

· Client facing individuals employed by IIROC-regulated firms must meet clearly defined IIROC proficiency, continuing education and “fit and proper” requirements. IIROC conducts business conduct examinations and financial reviews of IIROC-regulated firms. We review all investor complaints that we receive and enforce IIROC rules and regulations to hold dealers and individuals responsible for their actions through various disciplinary sanctions, up to and including expulsion.

· IIROC-regulated advisors may offer a variety of products and services, ranging from mutual funds, guaranteed investment certificates, stocks and bonds to more complex products. IIROC, however, does not regulate the sale of insurance products nor do we regulate those who manufacture mutual funds (including the fees they can charge).

· IIROC sets policies that are informed by broad consultations and empirical input, such as the second set of Client Relationship Model proposed reforms we published for comment in December, 2013 to increase the transparency of account performance, and account fees and charges.


How does IIROC fit into the overall regulatory framework in Canada?

· There are two self-regulatory organizations (SRO) in Canada of which IIROC is one.

· IIROC carries out its regulatory responsibilities under “Recognition Orders” from securities commissions that make up the Canadian Securities Administrators (CSA).

· Generally, the scope of activity a firm or individual conducts, and the products they offer determines which SRO or statutory regulator is responsible.

· Investment dealers can trade in any type of security and with any type of client; mutual fund dealers may trade only in securities of mutual funds; exempt market dealers may trade in any security that is prospectus exempt or in any security with a client who qualifies for the purchase of an exempt security (e.g., accredited investor); portfolio managers may advise any type of client with regard to any type of security – portfolio managers tend to have full discretionary authority over the client’s account.

IIROC regulates the firms registered as “investment dealers”.

How can investors find out which regulatory body is responsible for a particular firm or individual?

· At IIROC, we created an online investor resource – AdvisorReport to help consumers determine if the individual they are working with is employed by an IIROC-regulated investment firm and subject to our oversight.

· From AdvisorReport, investors can learn about the individual’s background, including employment history, education, qualifications and if there has been any disciplinary action.

· In November, IIROC launched another online investor tool – a Glossary of Financial Certifications ) -- with information about 40 commonly used certifications in the financial industry in Canada. This one-stop resource provides consumers with comparable information about the organization granting the certificate, the exams required to earn that certification and if there is a complaints mechanism with the issuing organization.

· The Canadian Securities Administrators (CSA) also offer a National Registration Search, which is web-based.


What is IIROC doing to improve the oversight of firms and individuals you regulate?

· IIROC-regulated firms and their employees are required to:
· meet high proficiency and ethical standards and fulfill 12 hours of compliance and 30 hours of continuing education requirements every 3 years;
· adhere to strict rules and regulations that require them to deal “fairly, honestly and in good faith” with their clients;
· comply with a variety of rules including “know your client” obligations, making suitable investment recommendations, and identifying and dealing effectively with conflicts of interest in a fair, equitable and transparent manner;
· report investor complaints and the actions they have taken.

· We regularly review and update our registration and continuing education requirements, issue guidance notices to improve compliance and proactively create or change rules and regulations to adapt to emerging issues to enhance investor protection.

· Each year, IIROC issues a comprehensive report highlighting key findings from our examination and surveillance programs, results from surveys and targeted reviews, and actions firms must take to comply.

· Based on our results from 2013, we identified a number of areas of focus for 2014, which include strengthening suitability assessments and know-your-client documentation, borrowing for investment purposes and addressing potential conflicts of interest.

 

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