A new self-regulatory organization is set to launch that will merge the functions of IIROC and the MFDA, and will be led by current IIROC chief executive officer Andrew Kriegler.
Canada’s regulator of investment dealers says more consistent enforcement powers have made it better at collecting the millions of dollars in fines it imposes each year, but that ensuring the money is paid back remains a slow and imperfect process.
The Investment Industry Regulatory Organization of Canada (IIROC), which oversees 174 investment firms and their advisers, said in its latest enforcement report, released Thursday, that collection rates jumped to 79 per cent in its 2020 fiscal year and 60 per cent in 2021. Both of those figures are far higher than the regulator’s previous collection rates, which ranged from 8.3 per cent to 21.3 per cent between 2014 and 2017.
The regulator is generally able to collect all the fines it imposes on investment dealer firms, which want to stay in good standing with IIROC. It received 100 per cent of the $1.5-million in penalties it levied against companies in the 2022 fiscal year, which ended March 31.
So far, IIROC has collected 18 per cent of the $2.8-million in fines it imposed against individual advisers in the 2022 fiscal year. But it expects that proportion to rise much higher over the coming year as courts enforce fines, some penalized advisers make monthly or quarterly installments, and payments stemming from decisions handed down late in the year start to flow in.
Uncollected fines against individuals have been a sore spot for IIROC and another self-regulatory organization, the Mutual Fund Dealers Association (MFDA). In response, the regulators have put pressure on provinces and territories to grant them greater, more consistent legal powers to collect fines through courts, and to investigate crimes against investors. The expansion of those powers in Ontario in 2017 and British Columbia in 2018 (those two provinces are home to the lion’s share of IIROC’s investigations and enforcement actions) marked a turning point.
Since November, when Newfoundland and Labrador signed on as the sixth province to give IIROC what it calls a “full enforcement toolkit,” the regulator has been able to enforce fine collection through the courts in every province and territory in Canada.
Before the changes, individual investment advisers facing penalties could avoid paying fines by walking away from the securities business and abandoning their IIROC registration.
“People would just leave the industry and we really had no real, tangible way to collect that money,” Charles Corlett, IIROC’s vice-president of enforcement, said in an interview. “Now we can take steps through the courts to collect those fines the same way you would after you are successful in a civil trial.”
More recently, Mr. Corlett has seen a rise in penalized advisers “who are just simply agreeing to pay us” without IIROC having to follow through on the threat of going to court. “That is something of a huge sea change in the sense that those people are recognizing, ‘You know what, I have to pay this, I am accountable to the industry for having been disciplined,’ ” he said.
Yet it can still take years for IIROC to collect money from fines. Anywhere from 20 to 40 per cent of the penalties imposed are still going uncollected. Even though the regulator now has the power to find assets, garnish wages or seize homes, “the sad fact is that some people who are involved in the enforcement process, by the time they are in trouble … they may be close to insolvency,” Mr. Corlett said.
The full toolkit of powers provinces such as Newfoundland, Alberta and Quebec have provided to IIROC allows it to collect and present evidence at hearings, and protects the regulator against malicious lawsuits. But IIROC still doesn’t have all of those extra powers in Ontario and B.C. “We still think it’s a priority to try to get the full enforcement toolkit where we can,” Mr. Corlett said.
The nearly $4.4-million in total fines, disgorgements and costs imposed by IIROC in the 2022 fiscal year was roughly double the previous year’s total of $2.2-million, and comparable to several prior years. IIROC completed 76 investigations, and referred 41 per cent of those files for prosecution, which was the highest rate since 2018.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
