This guide is intended to provide transparency on the enforcement process and to assist Dealer Members, their Approved Persons, and employees, in understanding how the Enforcement process works. It is not intended to and may not be relied on to create procedural or substantive rights, obligations, or requirements.
While Enforcement will endeavour to be consistent, the specific circumstances of an investigation or proposed proceeding may require following different practices than are set out in this guide.
The Role of Enforcement
Enforcement strives to be fair, effective, and timely. Enforcement is responsible for investigating and commencing proceedings against Dealer Members and their Approved Persons.
Effective enforcement requires coordinated and cooperative efforts among regulators and other agencies. Where Enforcement detects any potential violations of provincial securities acts, we refer such matters to the relevant CSA jurisdiction. In certain circumstances, we work collaboratively with CSA jurisdictions on matters of mutual interest. We also make referrals to other domestic or foreign regulators and agencies and, if there is evidence of potential criminal activity, to the police.
Enforcement files may be opened from a variety of sources, including but not limited to examination findings, regulatory filings (COMSET or METS), client complaints, whistleblower information, referrals from other regulators, or other regulatory departments of the self-regulatory organization. Dealer Member supervision and complaint handling (where applicable) is reviewed in all cases.
Enforcement Staff investigate and litigate cases subject to internal policies and procedures, including a comprehensive Code of Conduct, which includes, among other things, the handling of potential and actual conflicts of interest.
Where a case is opened, Enforcement Staff obtains information and performs an initial assessment. Cases are selected using a risk-based approach, which reflects the fact that Enforcement cannot investigate and litigate every regulatory contravention that is identified or brought to our attention. Cases are subject to robust case evaluation and decision-making procedures, based on the sufficiency of the evidence gathered, the seriousness of the conduct identified and an analysis of the applicable rules and prior, relevant cases. Cases are assessed throughout to ensure that regulatory resources are being used effectively and efficiently and that the investigation or proposed enforcement proceeding is in the public interest. Where appropriate, cases may be referred to other regulators, agencies or law enforcement.
Investigations and proceedings relating to Dealer Members that are registered as investment dealers and their Approved Persons are conducted pursuant to the Investment Dealer and Partially Consolidated Rules, Series 8000.
Investigations and proceedings relating to Dealer Members that are registered as mutual fund dealers and their Approved Persons are conducted pursuant to the Mutual Fund Dealer Rules and the Rules of Procedure.
Enforcement Staff routinely gather information and make information requests to Dealer Members and Approved Persons to assist us in conducting investigations.
Enforcement Staff conduct interviews with subjects of the investigation and other individuals including complainants and supervisory staff of the Dealer Member. Enforcement Staff review and assess the information and documents obtained to determine whether contraventions have occurred, evaluate the seriousness of the contraventions, and identify aggravating and mitigating factors that could affect the recommendation to bring a proceeding.
Notice and Requests for Information
Enforcement Staff will inform the subject of an investigation that an investigation into their conduct has been commenced, and where an Approved Person is the subject of an investigation, the Dealer Member is also informed (if applicable, both the current and former firm are informed).
Timelines for responding to requests for information or interviews, and the determination of how the interview should be conducted (primarily by videoconference and generally under oath) is at Enforcement Staff’s discretion.
In some provinces, securities legislation empowers Enforcement Staff to compel documents and information relevant to an investigation from companies and individuals who are not otherwise subject to our jurisdiction.
If the subject of a documentary or information request asserts a claim of legal privilege, details of the type and scope of the privilege must be provided to enable Enforcement Staff to assess the claim.
Dealer Members and Approved Persons are permitted to consult counsel during investigations and are entitled to be represented by counsel at interviews.
Interviews may be conducted under oath and are recorded. The length of interviews varies depending upon the complexity of the case and the amount of relevant information that the individual may possess. To protect the confidentiality and integrity of investigations, individuals who attend interviews are not permitted to record the interview, and the content of interviews including the questions asked and answers given during an interview should not be discussed with anyone other than their legal counsel, except with the consent of Staff.
During interviews, Enforcement Staff will show documents to the individual and will question them about the documents. Subject to Enforcement Staff’s discretion, upon request, Enforcement Staff will permit the individual to access some or all the exhibits prior to the interview to prepare. Enforcement Staff retains the discretion to ask about documents that were not made available in advance.
The individual may be asked by Enforcement Staff to provide undertakings to produce specific documents, make inquiries, review records, or produce additional information relevant to the matters under investigation after the completion of the interview.
In exceptional circumstances, if Enforcement Staff believes there is a risk that evidence relevant to the matters under investigation may be concealed or destroyed or if responses to requests for information are not complied with, Enforcement Staff may enter the Dealer Member’s place of business with or without notice. In such cases, Enforcement Staff takes steps to ensure that material information relevant to the investigation is secured and protocols are implemented to ensure that legal privileges are respected.
Failure of a Dealer Member or Approved Person to comply with a request for information, an interview request, or a failure to answer undertakings, may constitute a failure to cooperate with an investigation and may lead to the commencement of an enforcement proceeding. Failing to cooperate can result in substantial sanctions, including a fine and prohibition on approval to conduct securities-related business.
In circumstances where a Dealer Member or Approved Person provides proactive and exceptional cooperation to Enforcement, for example by self-reporting misconduct or providing evidence that was unlikely to be discovered by other means, Enforcement Staff will give credit for cooperation and consider the cooperation a mitigating factor to be considered when determining the appropriate sanctions in the event that enforcement proceedings are recommended.
In every investigation, Enforcement Staff assess the adequacy of a Dealer Member’s supervision. Enforcement Staff evaluate whether Dealer Members and their supervisory staff were reasonably proficient and diligent. Where circumstances warrant, Enforcement Staff will initiate proceedings relating to compliance and supervisory matters against an Approved Person and the Dealer Member. If a Dealer Member received complaints, Enforcement Staff examine whether the Dealer Member handled such complaints in accordance with the relevant rules and regulatory requirements.
Conclusion of the Investigation
At the conclusion of an investigation, Enforcement Staff may:
- close the case with no further action;
- close the case with a cautionary letter; or
- recommend the commencement of an enforcement proceeding.
Generally, Enforcement Staff will inform the Dealer Member or Approved Person prior to commencing the proceeding. The Dealer Member or Approved Person will be informed of the proposed allegations and the relevant facts, and subject to Enforcement Staff’s discretion, provided key evidence supporting the allegations. Enforcement Staff will give the Dealer Member or Approved Person an opportunity to provide any information which may be relevant to Enforcement’s decision to commence a proceeding.
Dealer Members and Approved Persons subject to an investigation are encouraged to engage in settlement negotiations at the earliest opportunity and prior to the recommendation to commence a proceeding. Enforcement Staff will meet with the subject of an investigation and their counsel and may agree to share information relating to an investigation, at Enforcement Staff’s discretion, to achieve a resolution.
Enforcement Staff and the Dealer Member or Approved Person may agree to settle a proposed proceeding prior to its commencement. All settlement negotiations are confidential and conducted on a without prejudice basis.
If a settlement can be achieved, Enforcement Staff and the Dealer Member or Approved Person will agree on the applicable regulatory contravention, the relevant facts and conclusions, and the sanctions and costs in a written settlement agreement, which must be approved by a hearing panel to take effect. If approved, the settlement agreement and the hearing panel’s reasons for accepting the settlement are made public through a news release and posted publicly.
Commencing a Proceeding
If no resolution is achieved, Enforcement Staff will commence a proceeding pursuant to the applicable rules.
Enforcement must promptly notify the public and the news media of the specifics relating to each enforcement proceeding commenced and the disposition of each proceeding, including reasons, by way of news release. Subject to certain exceptions, proceedings are open to the public and news media.
For further information on the conduct of proceedings see Guide to Hearings.