Earlier this month, Alberta became the first province to grant the Investment Industry Regulatory Organization of Canada (IIROC) express, direct legal authority to collect evidence during the course of its investigations and provide statutory immunity from civil suits to IIROC staff acting in good faith in the course of those investigations, through the enactment of Bill 13: Securities Amendment Act, 2017 (Bill 13). Bill 13 came into force and effect on June 7, 2017.
IIROC has publicly expressed its view that the new legislation was necessary to effectively carry out its duties as a public interest regulator. This position is in line with IIROC’s objective of pursuing broader enforcement powers across the country, something it listed as a “key priority” for 2018 as discussed in our June 2017 Blakes Bulletin: Investment Industry Regulatory Organization of Canada Sets Priorities for 2018. While IIROC has not released any specific plans related to this development, it has been public about its efforts to actively seek similar legal authority in all other jurisdictions in Canada.
NEW INVESTIGATIVE POWERS
IIROC carries out its mandate of overseeing trading activity and investment dealers on both debt and equity markets in Canada pursuant to Recognition Orders from the Alberta Securities Commission. It regularly investigates and prosecutes firms and advisers who breach IIROC’s rules.
Bill 13 greatly enhances IIROC’s investigative powers. In particular, it grants IIROC:
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The ability to summon and enforce the attendance of witnesses
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The authority to appoint a person to conduct an investigation, compel witnesses to give answers and produce documents and records, including evidence under oath
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The power to apply to the Alberta Court of Queen’s Bench to have a witness committed for contempt as if they were breaching an order or judgment of the court if they fail to comply with the above
Bill 13 further amends section 222(1) “Immunities” to provide IIROC staff with immunity from civil actions, provided they are acting in good faith in the performance or intended performance of their duties and powers. It further provides immunity for any neglect, omission or default committed in the performance of their duties or powers if done in good faith.
Alberta was also the first province to permit IIROC to collect disciplinary fines directly through the courts. Quebec and Prince Edward Island have since followed suit, with Ontario also having introduced legislation with a view to providing the same power. Previously, firms and individuals were required to pay their fines if they wished to remain dealer members or registrants of IIROC, but IIROC had no further powers.
Increased ability to collect fines was a primary goal identified in IIROC’s Strategic Plan for 2016–2019. IIROC publishes unpaid fines on their website and, as of February 2017, over C$10-million of fines, disgorgement and/or costs have not been paid to IIROC by disciplined individuals. In the past, many simply elected to leave the investment industry rather than pay a fine, disgorgement order or costs award. IIROC’s expanded ability to collect fines even after an individual has left the investment industry will likely represent a more effective deterrent to those subject to oversight by IIROC.
IMPLICATIONS
The combination of expanded powers and legal immunity will presumably result in a more active enforcement presence by IIROC in Alberta, although the ultimate impact on enforcement and disciplinary proceedings remains to be seen. Those outside Alberta should also watch with interest given IIROC’s stated intention to pursue similar powers across the country, as policy-makers across Canada will no doubt be influenced by this Alberta experiment and whether it successfully improves the state of investor protection across Canada.
