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Originally published: December 9, 2016
This article is part of the Investor Office series of discussions with key figures in Canada’s financial services industry whose work impacts investors. The views expressed in this article are entirely those of Andrew Kriegler and are not intended to represent the views of the Investor Office or the Ontario Securities Commission.
Andrew Kriegler is the President and Chief Executive Officer of the Investment Industry Regulatory Organization of Canada (IIROC). The Investor Office recently sat down with Andrew to discuss his background, IIROC, and IIROC’s investor-focused work.
I’m very fortunate because I’ve had a chance to work in various parts of the financial services sector. I started as a bond trader, was the treasurer of a major bank and I also ran the Canadian business of a global rating agency. Immediately prior to my role at IIROC I worked at the Office of the Superintendent of Financial Institutions as Deputy Superintendent for a couple of years after having worked in the financial services sector for almost 30 years. I think that’s one of the exciting things about this role – that I get to use all of my previous experience to try and do the job better.
My wife and I have two kids and have been married for 25 years. We’ve been in Toronto pretty much this whole time; it’s a great city to be in. But one of the nice things about this job is that, because it’s a national job, I get to see the whole country.
On IIROC’s role…
IIROC is the national self-regulatory organization that oversees investment dealers and their trading activity in debt and equity securities.
We work for the provincial securities regulators. We are a national organization with our own rules and guidelines for the behaviour of the dealers. Because we are national we can deliver consistent regulation across the country on behalf of all of the regulators together.
There are some 175 firms and roughly 28,000 registrants – individuals who work for these firms. They are not only investment firms but also, for example, Alternative Trading Systems (ATSs). An ATS is similar to an exchange. So, we regulate the trading activity on exchanges, which are themselves directly regulated by provincial regulators, but ATSs fall under our jurisdiction directly. We do market surveillance in real time and flag unusual activity for follow up either under our rules or via referral to the provincial regulators.
On the role of a self-regulatory organization…
A self-regulatory organization (SRO) is a regulatory agency that is responsible for the front-line supervision of a group. In our case it’s investment dealers. We get our authority from the provincial regulators who effectively say to us, “We are going to ask you to be responsible for the regulation and the oversight for this category of organizations and we will carve you out of our rules because you have a separate set of rules that we’ve judged to be equivalent. And we’ll check on you, we’ll do oversight of you, we’ll do audits of you and checks on you to make sure you’re doing a good job.”
On IIROC’s investor-focused initiatives…
We have a lot going on over the course of the next couple of years related to investors.
Half of the investigations that we’ve done over the past year have been so-called “suitability” cases, the majority of which have involved seniors. It’s wrong that investors are being offered products and recommendations that are unsuitable for them given their investment objectives, risk tolerance and financial circumstances. It’s an area that requires a lot of attention from us and we are giving it a lot of attention.
Over the coming years we want to continue our strong focus on seniors but also more broadly on vulnerable investors, of whom some seniors can represent a particular segment.
Currently, we are working to ensure that IIROC has all of the tools we need to do the job that we’ve been asked to do by the OSC and its peer regulators across the country. A big issue is the enforcement of fines. We currently don’t have legislative power in most provinces to enforce the payment of fines that have been decided through proper disciplinary processes – and there is more than $18-million in outstanding fines in Ontario, out of approximately $30-million owed coast to coast.
We are also working to close regulatory gaps in Ontario and in other provinces across the country to ensure those we ban can’t simply move to another platform without regulators or investors knowing their disciplinary history. To help achieve this we signed an agreement with the Financial Services Commission of Ontario to make sure that we know about the people on their regulatory platform who have been disciplined, and why. In return we will do the same.
We want to make sure we don’t have a circumstance where someone has broken the rules in one place and can continue on dealing with the public in another. We’ve signed similar agreements with regulatory bodies in Québec and British Columbia and we’re actively working on others as well.
On the importance of the investor perspective…
I think the first thing to do is to underline that having that investor perspective is extremely important to us at IIROC. We need to know what investors think, to understand their experience and point of view so that we can incorporate this input into our decisions and actions.
Because retail investors, as a group, represent such a large and diverse set of people, it’s very hard to reach out and to understand what they are thinking, what they’re worried about or where they think more efforts need to be made.
To help us understand the issues investors are facing in one area, we conducted a series of focus groups with investors in Ontario and Québec. We looked at how the ‘Know Your Client’ process works. Are the forms used to gather information effective? What’s good about them and what’s bad? How should they change?
We’re committed to having that investor perspective and also recently launched a national investor research panel to allow us to do online polling and quantitative surveys about investors’ reactions to important policy questions.
In addition, in Ontario, not only do we have regular contact and a partnership with the Investor Office and the OSC but we also meet regularly with investor groups such as the Investor Advisory Panel, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) and CARP.
Our Complaints and Inquiries team fielded more than 2,500 calls, emails and letters from across the country last year. We keep track of the issues to see what’s driving complaints to help us spend our time and energy to determine what’s important to investors. We’re publishing this information as well as following up with the firms we regulate.
Any final thoughts?
Here at IIROC we have a dual mandate – protecting investors and supporting healthy capital markets. Supporting healthy capital markets also protects investors because it means that they have opportunities to invest, to save and to prepare for their retirement. At the end of the day it all comes back to protecting investors.