Unpaid fines imposed by investment industry regulator reach more than $900K in Manitoba

More than $900,000 in fines imposed by an investment industry regulator in Manitoba over the past decade remain unpaid, but a provincial law in the works could improve the regulator’s track record on collecting fines.

Manitoba's Bill 23 aimed at improving regulator’s ability to collect fines

A proposed Manitoba law would allow the Investment Industry Regulatory Organization of Canada to file its discipline decisions in court to help enforce payment of fines. (Jaison Empson/CBC)

More than $900,000 in fines imposed by an investment industry regulator in Manitoba over the past decade remain unpaid, but a provincial law in the works could improve the regulator's track record on collecting fines.

Dating back to 2008, some $911,000 in unpaid fines are still owed by Manitobans who were disciplined by the Investment Industry Regulatory Organization of Canada (IIROC), which means nearly two-thirds of the fines levied in this province are unpaid.

"This is clearly wrong and needs to be addressed," Elsa Renzella, IIROC's senior vice-president for registration and enforcement, said in a brief to a committee at the Manitoba legislature.

Renzella is supporting a law proposed by the Manitoba government that would allow IIROC to file its discipline decisions in court to help enforce payment of fines.

Other provinces including Alberta, Quebec, P.E.I. and Ontario have already enacted similar laws, while British Columbia and Manitoba introduced bills this year.

The Manitoba law would also give IIROC officials protection from "malicious" lawsuits in the course of performing their regulatory duties.

IIROC's figures on unpaid fines in Manitoba were presented this week at a legislative committee meeting into Bill 23, the Commodity Futures Amendment and Securities Amendment Act.

Nearly 600 investment advisers working at more than 160 offices are approved by IIROC to serve Manitoba clients.

The national self-regulatory organization for the investment industry also released its annual enforcement report this week showing nationally there are more than $32 million in unpaid fines against individuals over the past decade.

While IIROC collects most of the fines imposed against disciplined companies — 91.2 per cent nationally in 2017 — collection of fines against individuals lags far behind at just 16.2 per cent.

That's why IIROC asked the provinces for the additional enforcement tool of turning to the courts to enforce disciplinary decisions.

"Individuals can evade payment by simply leaving the industry and no longer being registered with IIROC," Renzella explained.  

Elsa Renzella of the Investment Industry Regulatory Organization of Canada said that currently, people can evade payment by simply leaving the industry. (IIROC)

"Knowing that we can collect fines through the courts — which Bill 23 provides — will act as a deterrent to individuals who might otherwise consider engaging in misconduct," she said.

Renzella described a case in which a Winnipeg investment adviser was disciplined for making unsuitable recommendations for 11 clients, some retired, some nearing retirement. She said they trusted their investment adviser and in some cases invested part of their pensions, but ended up suffering losses.

The adviser was assessed fines and costs totalling $110,000 but has not paid any of that amount, Renzella said in her submission to legislators.

"Bill 23 currently being considered will provide us with the ability to pursue collection of fines against individuals such as this adviser who harm investors, especially seniors who are vulnerable and need our protection," she said.

The bill is meant to "continually sharpen our thinking on how to keep investors safe," said Finance Minister Cameron Friesen, and "broadcast a message out there that bad actors who are selling products to Manitobans had better be on notice that they will be prosecuted."

He said the bill is expected to pass in the current session of the legislature.

The Opposition NDP has voiced some support for it.

"We think this bill is a good bill but we think that it could go further," said NDP critic Matt Wiebe.

"It could be strengthened to really ensure there's the proper consumer protection we want to have in the investment industry," Wiebe said.
Matt Wiebe called on the government to add a provision that would allow the regulatory body to compel non-IIROC registrants to co-operate with investigations and provide evidence. (Holly Caruk/CBC)

He called on the government to add a provision IIROC is requesting that would allow the regulatory body to compel non-IIROC registrants to co-operate with investigations and provide evidence.

"In Manitoba, we only have the ability to obtain evidence from firms and individuals who are registered with us," said IIROC's Renzella. "We have no ability to obtain evidence from third parties not under our jurisdiction."

"This poses a significant challenge to our ability to effectively investigate and prosecute wrongdoing," she said.

She gave the example of an investment adviser accused of misappropriating funds from a client's account and using them for personal benefit.

"We have access to the client's account and will see the funds withdrawn. However, we have no right to access the adviser's bank information to see if those funds might have been deposited elsewhere, because the adviser's financial institution is bound to protect its clients' information," Renzella said.

Alberta last year granted IIROC the authority to collect evidence from third parties, she said, and Quebec recently proposed to do the same.

Manitoba's finance minister said he does not favour the idea, and instead said such an "extraordinary" power should be reserved for government-related bodies such as the Manitoba Securities Commission.

"MSC does have this power to compel," Friesen said, adding IIROC could collaborate with the securities commission when needed.

"It might be banking records, it might be phone records, and in those cases they could actually seek and have that request accommodated."


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