The British Columbia Securities Commission’s recent Compliance Report Card has revealed that many BC adviser and dealer firms do not know their clients.
Aside from know-your-client deficiencies, suitability deficiencies were highly common, followed by policies and procedures and conflicts of interest deficiencies. A hundred and thirty deficiencies were identified during 19 compliance reviews.
Each review averaged 6.84 deficiencies. In the case of major compliance failures, the BCSC set registration terms and conditions like mandating the recruitment of a compliance monitor; a firm could not accept new clients until the deficiencies are fixed.
“While we recognize that many firms have made significant efforts to adapt to the new rules, the report card shows that some firms still have more to do. We expect registered firms to uphold the standards of conduct set out in Canadian securities regulations, including those related to client focused reforms,” said Peter Brady, the BCSC’s executive director, in a statement.
These reforms were introduced nationwide in 2021 as key consumer protection rules covering know-your-client, know-your-product, and suitability requirements. The BCSC initiated a selective review of BC firms centered on their CFR compliance last year.
The number of deficiencies around annual financial statement submission also increased, per the reviews. The BCSC said the inability to provide this information within 90 days of annual year-end hinted at compliance issues that could lead to a firm’s broader evaluation.
A dealer firm was suspended for compliance failures, and another willingly terminated its registration. The BCSC’s enforcement division received referrals to further investigate four firms recording systemic failures or compliance cultures that were significantly below expectations.
Last year, the commission settled with firms and individuals that did not respond to conflicts of interest and failed to meet KYC requirements.
The BCSC is a provincial government agency that serves as the principal regulator of approximately 174 adviser and dealer firms.