The following statements set out Enforcement Staff’s approach to issues that commonly arise in the negotiation of settlement agreements or in the imposition of sanctions by a hearing panel following a contested hearing:
1. Credit for Cooperation
Required Cooperation
CIRO rules require Regulated Persons to cooperate fully with investigations and respond to requests for information (whether the requests are for written statements, documents, or other information) in a timely and straightforward manner.
A respondent cannot claim credit for proactive and exceptional cooperation while consistently missing investigation deadlines, providing incomplete or misleading responses to information or document requests, or otherwise delaying or impeding the progress or completion of an investigation.
Proactive and Exceptional Cooperation
In light of the general requirement to cooperate with CIRO investigations, only a record of cooperation that is proactive and exceptional will be considered as a mitigating factor for the sanctions sought against a respondent.
The following are examples of factors that may be considered in assessing a firm or individual’s cooperation:
- prompt and detailed self-identification of suspected or uncovered misconduct;
- early self-identification of contraventions followed by thorough internal reviews, the results of which are promptly shared with Enforcement Staff
- substantial assistance to the investigation by obtaining and providing evidence and/or testimony from persons beyond CIRO’s jurisdiction; and
- whether the cooperation led to an early resolution of the matter.
Proactive and exceptional cooperation allows investigations to be commenced, conducted, and completed more quickly using fewer resources, thereby allowing Enforcement to deploy its resources more efficiently and effectively to other matters. For these reasons, respondents will be given credit for the purposes of sanctions where proactive and exceptional cooperation is provided.
However, the extent of credit will vary depending upon the other factors such as the nature of the contravention, the extent of harm to clients and market integrity, the duration and extent of the misconduct, and the existence of a prior related disciplinary record. For example, where the misconduct is egregious, the overall objectives of sanctioning necessitate a severe sanction notwithstanding whether there was proactive and exceptional cooperation from the respondent.
2. Early Resolution Offers
Purpose
Enforcement Staff will provide Early Resolution Offers to the subjects of enforcement proceedings to encourage early settlement of cases and timely resolution of matters under investigation. Early Resolution Offers are intended to increase the granting of credit for cooperation and encourage Dealer Members to implement timely compensation and remedial measures, which benefits investors and improves overall business standards and practices.
The Early Resolution Offer
The Early Resolution Offer constitutes Enforcement Staff’s best settlement offer by granting a 30% reduction on the sanctions that Enforcement Staff would otherwise be willing to agree to in a settlement agreement. The reduction can be applied to a fine or a suspension of approval but will not be applied to the disgorgement of any amount obtained as a result of the contravention or any costs incurred in connection with the investigation.
An Early Resolution Offer will be considered from the commencement of an investigation until the commencement of a proceeding.
The Early Resolution Offer provided by Enforcement Staff will contain:
- the sanctions that Enforcement Staff is prepared to agree to;
- the admissions of fact that are required;
- the CIRO requirements that have been contravened; and
- a 30-daydeadline for acceptance of the offer.
A settlement agreement agreed to pursuant to an Early Resolution Offer is subject to acceptance by a hearing panel.
Criteria
Enforcement Staff will consider the application of the following criteria in determining whether to make an Early Resolution Offer:
- whether the extent, scope and harm of the misconduct, non-compliance, or regulatory breach has been sufficiently determined;
- the extent to which the subject has demonstrated proactive and exceptional cooperation;
- the extent to which the non-compliance which is the subject matter of the case has been remedied or will be remedied;
- where there are client losses, compensation must be paid;
- where there has been a financial benefit, the amount obtained as a result of the contravention must be disgorged;
- in the case of individuals, whether they have been internally disciplined; and
- whether the subject, through counsel, an agent or otherwise, has expressed a willingness to resolve the matter in a timely manner.
3. Suspensions and Permanent Bars
Generally, CIRO Staff will not seek suspensions greater than five (5) years unless the misconduct is so serious as to merit a permanent bar. This is based upon CIRO Staff’s view that, absent extraordinary circumstances, any misconduct so serious as to merit a suspension of more than five (5) years should warrant a permanent bar to membership of a Dealer Member firm or a permanent bar to approval or employment of an individual from the securities industry.
4. Internal Discipline by a Dealer Member
Dealer Members may impose internal discipline against a Regulated Person for circumstances that give rise to CIRO disciplinary proceedings. This practice is to be encouraged as it is appropriate for Dealer Members to effectively address the conduct of its employees and to encourage and foster a culture of compliance.
Enforcement Staff will consider relevant internal discipline measures when considering whether to initiate a proceeding. However, CIRO has a public interest mandate and it is not possible to fulfill this mandate by eliminating the role of general deterrence. Sanctions are intended to inform industry participants and the public as to the consequences of regulatory contraventions. While internal discipline may reduce the quantum of sanctions sought, it should not be the expectation that the imposition of internal discipline will eliminate further sanctions.