Enforcement staff (Staff) have the authority to investigate possible misconduct by firms or by their registered individual employees and to initiate disciplinary proceedings.
Enforcement is comprised of three main working units: Case Assessment, Investigations and Prosecutions.
During the Case Assessment process, each matter is reviewed to determine whether Staff have sufficient evidence of a breach of IIROC's rules to warrant taking disciplinary action.
Many IIROC enforcement actions begin with an investor complaint. IIROC also receives referrals from firms, other IIROC departments, and from other regulators and police agencies in Canada and abroad.
Every complaint that IIROC receives is reviewed by Staff who can take a range of actions. However, not all complaints will proceed to the Investigations unit. Other possible courses of action include issuing a cautionary letter or referring the case to other regulatory or police authorities.
If Case Assessment’s initial review indicates that further investigation is warranted, the matter is referred to the Investigations unit to begin a formal investigation.
Formal investigations may also be undertaken on the basis of a direct referral from another IIROC department, a request from a securities commission or other regulatory organization, or any other information received by IIROC.
Individuals or firms who are the subject of an investigation may retain counsel to assist them during the investigation.
Investigations are conducted by an Investigator in collaboration with Enforcement Counsel. The investigation normally includes interviews of the complainant and any other witnesses such as firm supervisors, support staff, and compliance staff. Under IIROC rules, firms or registered individuals involved in an investigation may be required to:
submit a written report relating to any matter under investigation;
provide copies of the books and records relevant to the investigation; and
participate in an interview with Staff.
At the conclusion of an investigation, the Investigator and Enforcement Counsel review the findings of the investigation and recommend an appropriate course of action. A matter will be considered for formal disciplinary action where there is evidence that a breach of IIROC’s rules has occurred. Other possible actions include the issuance of a cautionary letter or a referral of the matter to another organization such as a securities commission or a police agency.
In all cases, Investigators and Enforcement Counsel will also assess the firm’s supervision of the matter and determine whether the firm adequately responded to the issues presented.
Once it has been determined that there has been a breach of IIROC rules that warrants formal disciplinary action, Staff will initiate disciplinary action.
A Notice of Hearing (which includes a Statement of Allegations) will be drafted that sets out, among other things, the time and date of the hearing and the specific allegations made against the individual or firm. The Notice of Hearing is served on everyone named in the Notice, who is referred to as a Respondent.
The Notice of Hearing is then filed with IIROC's National Hearing Coordinator (NHC). The NHC administers all disciplinary proceedings at IIROC. The NHC receives materials filed by the parties, distributes them to the Hearing Panel members, sets hearing dates and performs other administrative functions.
Once a Respondent is served with the Notice of Hearing, the Respondent must respond within 30 days. The response must set out the facts in the Statement of Allegations which the Respondent admits to, the facts that the Respondent denies and the reasons for denying them, and set out all of the other facts that the Respondent wishes to rely upon in defence of the allegations. Failure to deliver a response may result in findings being made against the Respondent and penalties being imposed without further notice.
The purpose of a pre-hearing conference is to encourage the parties to settle or agree upon as many issues as possible such as concerns over the disclosure of documents or other information, witness scheduling, hearing dates and other matters that will help the parties to expedite the hearing process. The parties also discuss whether the entire case can be settled or resolved without proceeding to a contested hearing. Everything discussed at a pre-hearing conference is privileged and confidential, which means that it cannot later be referred to or used in any way against any of the parties.
Learn more about IIROC’s disciplinary hearing process