Investors Beware: Regulator Wants To Protect Bad Advisors From Public Scrutiny

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Here's The Globe and Mail article by Wealth Management reporter Clare O'Hara: "Investor advocates are taking aim at proposed regulatory changes from IIROC". 

In a nutshell: "The proposal - which recently closed its second comment period - includes a minor contravention program (MCP) where individual advisers could admit to wrongdoing and pay a standard $5,000 fine; and an early - resolution offer for investment firms that will give regulators more "flexibility" in addressing rule breaches, depending upon their seriousness."

"However, investor advocates are raising concerns about the proposal saying the minor contravention program would be closing the door on publicly identifying offenders".

"In other words, an investor would not be able to search on a publicly available database for a record of an adviser having a history of contraventions of IIROC rules that are resolved under the minor contravention program."

If you go to the IIROC home page on their website, the first thing that should jump out at you is their commitment to protect investors:

What should trouble us is that the self-regulated  investment industry is trying to hide bad advisors from the public. 

If you are doing your due diligence and researching your prospective or acting advisor (as all investors should be doing), you are going to find that this bit of character reference is not available. Would you not want to know if your advisor had mis-behaved in the past? Would it not be part of the assessment process? At least to ask him / her to explain themselves for their past indiscretions.

More conflict of interest from the self-regulating investment industry.

Once again I bring up my past experience as a branch manager: advisors who try to flaunt the rules to their advantage usually do not just do it one time. I have witnessed plenty of serial bad behaviour in my time and those who behave badly should be identified to those potential investors who may be fooled or sold on placing their trust in them.

I am not the only one who thinks this is somewhat absurd:

According to Ms. O'Hara: "" question how such an outcome is in the public interest and consistent with IIROC's stated goals of protecting investors and supporting healthy Canadian capital markets" said Ermanno Pascutto, executive director of the Canadian Foundation of Advanecment of Investor Rights (FAIR), in his comment letter to IIROC".

"The Ontario Securities Commission's Investment Advisory Panel also expressed concern about granting anonimity to advisers who committed minor violations. "How can IIROC assert this proposal is in the public interest when the public is kept unaware of each MCP sanction?""

There are alternatives to the bank dominated wealth management and investing industry: wealth and portfolio management that carries a legal fiduciary duty to their clients well above the proposed "standard of care" administered by the IIROC advice channels. 

And your account protection is the same as the banks give you:

For example, High Rock uses Raymond James Correspondent Services (RJCS) to handle our client accounts (custody) and back office needs. Raymond James is protected by the Canadian Investor Protection Fund (CIPF): up to $1 million for each account.

My friends, if you cannot trust the regulators for full-disclosure, it may be time to seek out the alternatives.