YOUR
GUEST COLUMN
about receiving a letter from the Investment Dealers
Association of Canada (IDA) that makes advisors sweat? Is it that a letter usually means the IDA has received a client complaint and is starting an investigation? Is it the threat of a large penalty? Do they fear that their licences might be revoked? Are they weary of bad publicity in the local media? Or, are they afraid of the unknown?
Advisors who receive a letter from the IDA are generally concerned about all of these factors.
A letter from the IDA threatens their bottom line and reputation: two factors close to the heart of all advisors.
To help dispel the sweat and anxiety associated with an IDA investigation, the following is a description of the stages of the proceeding and what you should do at each stage— if you are faced with an IDA investigation:
❶ You receive a letter from the
IDA.
You should notify your branch manager and ask who should be notified in the compliance and/or legal department about the investigation. You should prepare a memo to that individual under your branch manager’s direction and enclose a copy of the IDA letter.
❷ The investigator requests all documentation relating to the matter.
The Know Your Client form is of central interest to the investigator when the complaint involves suitability. You should comply with the request for documentation and prepare a package, with the help of a lawyer.
The IDA investigator will analyse the documentation and decide whether to recommend to senior
IDA officials that the file be closed or pursued further by the IDA.
Aggravating the investigator is not advisable. At this stage, co-operation is the name of the game.
❸ If the case is pursued, the investigator chooses a day for the interview.
Meet with your lawyer before the interview to prepare for the types of questions you should expect to be asked. Your lawyer should be able to anticipate most of the questions that will be asked.
❹ After the interview, there will be a long delay before the next step is taken.
Months, and even years, can pass without a single word from the IDA. This can be very stressful. At your request, your lawyer can try to move the matter along. Eventually, the IDA will determine if the file will be closed or if it intends to refer the matter for a full hearing.
❺ Before the hearing, a settlement is usually discussed.
You and your lawyer will discuss the relative weakness and strength of the
IDA’s case. If the IDA’s evidence is strong, you may choose to settle.
(Many advisors choose to settle as the outcome of a hearing is always uncertain.) The settlement offer may include a penalty; a separate sum to reimburse the IDA for the costs of investigating the matter; a requirement that you take certain courses and/or a restriction on your licence.
A three-member panel must approve all settlements between the IDA and advisors.
❻ Some matters do proceed to a hearing before a threemember panel.
After hearing the evidence and legal argument, the panel decides whether there was a violation; the amount of penalty; and, whether your licence will be suspended or revoked.
Although I cannot dispel all the anxiety suffered by an advisor under an IDA investigation, I hope that an understanding of the process can reduce some of it, along with a stick of deodorant.
Ellen J. Bessner is a lawyer in Toronto at
Gowling Lafleur Henderson. She practises in the area of brokers’ liability and offers training to stockbrokerage firms and brokers.
ellen.bessner
@ gowlings.com
The above is intended for a general audience and should not be considered legal advice.
ADVISOR’S EDGE
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