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126 Cards in this Set
- Front
- Back
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What is the purpose of regulation?
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To foster an environment of fairness and protect the integrity of the marketplace.
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The principle-based approach
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1) This approach to regulation involves setting objectives for registered dealers and allowing them to decide how best to meet those objectives. The objectives apply to broad issues, such as staff proficiency and integrity, suitability of recommendations, gatekeeper responsibilities, such as preventing client abuse of the markets, and they may even extend to capital adequacy
2) This approach is clearer, simpler and less costly to implement than a rule-based approach, because it allows dealers to tailor their supervision and compliance to their business. 3) It also requires judgment, rather than strict adherence to prescribed rules and regulations. |
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The historical norm in Canada, and set specific requirements thatcover all aspects of a firm’s operations affecting public interest or market integrity issues.
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Rule-based compliance
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Create, administer and enforce their own rules and by-laws, and their authority is generallyderived from contract.
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Self-Regulatory Organizations (SROs)
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SRO's
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· IIROC (The Investment Industry Regulatory
Organization of Canada) · UMIR (Universal Market Integrity Rules) · IIAC (The Investment Industry Association of Canada) |
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What are the most significant SRO's for a CCO?
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IIROC and the Montreal Exchange (Bourse de Montréal). The stock exchanges and marketplaces have contracted their market conduct jurisdiction over Participants to IIROC, while retaining regulatory functions with respect to listed companies. The Bourse has jurisdiction over the market conduct of its Participants.
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The Investment Industry Regulatory Organization of Canada (IIROC)
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1) the national self regulatoryorganization overseeing all dealer members and trading activity on equity and debtmarketplaces in Canada.
2) responsible for enforcing the Rules regarding sales, businessand financial practices and trading activities of individuals and dealer members under IIROC’s jurisdiction. 3) develops recommendations to amend existing Rules, establishes new Rules and interprets existing Rules. 4) has detailed requirements regarding the activities of dealer members in its jurisdiction and extensive powers to investigate possible violations of its Rules. 5) can also take disciplinary action in response to alleged violations by dealer members and their employees. |
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IIROC’s compliance/surveillance function includes regulating
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dealer member and market compliance (specifically Business Conduct, Financial Compliance and Trade Review and Analysis) and market surveillance.
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How does IIROC carry out its regualtory responsibilities?
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Setting and enforcing rules regarding the proficiency, business and financial conduct of dealermembers and their registered employees.
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What imposes requirements on IIROC?
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Recognition orders, which may include approval by an Administrator of all IIROC Rule changes and oversight of IIROC’s operations to ensure they are effective.
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Administrator
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1) provincial or territorial securities regulatory authorities
2) can also delegate functions to IIROC 3) issue locally applicable interpretive guidance 4) approves the specific requirements applicable to dealers |
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Administrators vs IIROC
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· Administrators enforce the securities legislation within a particular province or territory and have jurisdiction over any person or entity acting in their jurisdiction.
· IIROC’s regulation is limited to its own dealer members. From a market regulation perspective, IIROC only has jurisdiction over Participants in the marketplaces it regulates through contracts; each marketplace, in turn, has contracts with its participants providing that the participant must submit to IIROC’s jurisdiction. |
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Universal Market Integrity Rules (UMIR)
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1) a standard set of Rules that generally applies to equity trading on all Canadian marketplaces to promote fair and orderly markets.
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Requires firms to develop and implement written policies and procedures and appoint a responsible head of trading to supervise compliance with UMIR.
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Policy 7.1
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Sets out guidelines on tradingsupervision obligations found in this policy.
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Market Integrity Notice No. 2003-025
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How does IIROC ensure compliance with UMIR?
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IIROC monitors real-time trading operations and market related activities. IIROC also investigates alleged Rule violations and administers any settlements and hearings arising from such violations.
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If IIROC identifies trading activity that may be prejudicial to the public or in breach ofmarketplace Rules, what actions can they take?
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IIROC can halt trading, with or without notice to an issuer, pending clarification of the matter. An issuer may also ask IIROC to halt trading in its securities pending the issuance of a news release. Further, an exchange may ask IIROC to halt trading in an issuer’s securities if it has concerns regarding the issuer.
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A trading halt
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1) ensures that all investors have the same timely access to material information regarding an issuer.
2) are meant to be temporary (usually a matter of hours), but can be maintained for up to a week. |
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What does a lengthy trading halt usually result in?
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A suspension of trading, andthe company must meet additional requirements to resume trading after a suspension.
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When are firms and representatives not allowed to trade in securities of an issuer?
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During a halt or suspension or if they aresubject to a cease trade order issued by an Administrator.
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The Investment Industry Association of Canada (IIAC)
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1) a member-based, professionalassociation that advances the growth and development of the Canadian investment industry.
2) acts as a strong, proactive voice to represent the interests of the investment industry forall market participants. |
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The IIAC’s mandate isfourfold:
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1) Advocacy: To be the voice of investment dealers and the brokerage industry, concerning regulatory and public policy issues for an investment environment that is efficient for its members, and that fosters savings and investment by Canadians
2) Industry profile: To build appreciation for the contribution that the securities industry makes to Canadians, to Canada’s capital markets and to the Canadian economy 3) Member support: To offer operational support that contributes to the ongoing success of its members and to their ability to cost-effectively serve investors and issuers 4) Market advancement: To promote globally competitive capital markets for Canada. |
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Canadian Investor Protection Fund (CIPF)
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1) not an SRO, but it is an important part of the SRO structure. 2) provides compensation for client losses when an IIROC dealer member becomes insolventand cannot return client cash and/or securities.3) It does not cover clients’ losses resulting from changing market values, unsuitable investments or the default of an issuer of securities. 4) It is funded by IIROC through payments based on quarterly assessments. 5) Provides policy input on Rules, such as margin, that may affect the capital adequacy of IIROC dealer members. |
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What is the maximum coverage amount for the clients of IIROC dealer members under the CIPF.?
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A maximum coverage of $1,000,000 for an account.
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Separate accounts, such as RRSPs, RRIFs, LIFs, LIRAs, LRIFs, RESPs, certain types of trusts orgroups of similar accounts, are treated as though they belong to separate clients and each accountis entitled to
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the maximum coverage
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What is the purpose of Securities Legislation and Regulations?
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Topromote the integrity of the financial markets and ensure investor protection.
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Securities Legislation
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Regulates matters such as registration of dealers and individuals, raising capital, issuer disclosure,proxy solicitation, takeover bids and improper conduct, such as insider trading. It also establishesthe provincial securities Administrators and provides their decision-making and enforcementpowers.
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Where do provincial Administrators have jurisdiction?
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Within its province or territory to register firms and individuals, make regulations governing dealer conduct, grant exemptions to its regulations and investigate violations of provincial legislation and conduct contrary to the public interest.
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What enforcement power do Provincial Agencies have?
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The authority to compel witnesses to attend hearings,take evidence under oath, and seize documents for examination and freeze funds or securities on deposit.
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Canadian Securities Administrators (CSA)
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TheAdministrators from the ten provinces and three territories have formed a joint panel known to co-ordinate and harmonize regulation of theCanadian capital markets.
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The CSA’s main shared systems are:
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(SEDAR)
(SEDI) (CTO) (NRD) |
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The System for Electronic Document Analysis and Retrieval (SEDAR)
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Used for electronicfilings by most public companies and mutual funds.
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The System for Electronic Disclosure by Insiders (SEDI)
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Is a 24-hour, online system forfiling and viewing insider trading reports required under provincial securities regulation.
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The National Cease Trade Order (CTO)
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Database provides subscribers with near–real-time email notification of new CTOs from B.C., Alberta, Manitoba, Ontario and Quebec, and a database of existing orders.
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The National Registration Database (NRD)
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Receives individual registration and IIROC approval applications, notices of termination and changes of registration information.
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What instruments does CSA use in efforts to harmonize provincial regulations?
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-National Instruments (NI): Have been adopted by all of the provinces, although they may contain exceptions where one or more province(s) retain slight differences from the others. -Multilateral Instruments (MI): which have been adopted by some provinces only, as identified in the instrument.
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NI 31-103, Registration Requirementsand Exemptions
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Its purpose is to modernize, streamline and harmonize the requirements forregistration across Canada.
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Under the NI when is the registration requirement triggered?
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If a person is in the business of trading (and not simply the act of trading a security).
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Who must register under NI?
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Investment fund managers, Ultimate Designated Persons and Chief Compliance Officers must register,although the number of firm and individual registration categories is significantly reduced.
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1) NI 11-201
2) NI 12-201 3) NI 14-101
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1) Delivery of Documents by Electronic Means
2) Mutual Reliance Review System for Exemptive Relief Applications, which establishes a system for coordinating approval of applications for exemptions from the laws or regulations of more than one province. 3) National Definitions, which sets out definitions for common terms used in the regulations of multiple jurisdictions. |
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NI 23-101, Trading Rules
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Which prohibits manipulation and fraud, and sets out a best execution obligation and detailed audit trail requirements for dealers; the audit trail requirements are not yet implemented but form the basis for the TREATS project, which aims to have industry-wide uniform standards for recording orders and trades and reporting to regulators as required.
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1) NI 23-102
2) NI 31-101 3) NI 31-102 and NI 31-509 |
1) Use of Client Brokerage Commissions as Payment for Order Execution Services or Research (“Soft Dollar” Arrangements).
2) Requirements under the National Registration System, and NI 31-201, National Registration System, which establish a coordinated process for reviewing registration applications in multiple jurisdictions. 3) National Registration Database, which sets out the requirements for joining and making registration applications through NRD, including the required forms |
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NI 33-102, Registrant Dealings with Clients
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Which establishes requirements regardingleverage risk disclosure and disclosures regarding securities activities carried on in bankpremises; it also contains prohibitions on tied selling and disclosure of confidential clientinformation.
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1) NI 33-105
2) NI 45-106 3) NI 81-105 |
1) Underwriting Conflicts.
2) Prospectus and Registration Exemptions, which covers exempt distributions andincludes a national definition of “accredited investor”. 3) Mutual Fund Sales Practices |
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CANADIAN SECURITIES REGULATOR TRANSITION OFFICE(CSTO)
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As part of Canada’s Economic Action Plan, the Government of Canada launched an initiative to create a single Canadian securities regulator, intended to strengthen Canada’s capital markets through consistent regulation It established the Canadian Securities Regulator Transition Office to lead and manage the transition. The Transition Office has a three-year mandate to assist and establish a Canadian securities regulator.
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What are the key features of the cooperative system (CSTO)?
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•A common regulator will administer a single set of regulations designed to better protect investors, enhance Canada’s financial services sector, support efficient capital markets and manage systemic risk.
• The regulator will be directed by an expert board of independent directors with relevant capital markets-related expertise and that is broadly representative of the regions of Canada. • A Council of Ministers of all participating jurisdictions will oversee the cooperative system. • There will be an executive head office in Toronto and a nationally integrated executive management team. • The regulator will have a regulatory office in every participating province with staff,expertise and resources that are commensurate with the capital markets activity and regulatory and enforcement demands of that jurisdiction. • The regulatory offices will deliver consistent regulation in a way that is responsive to the interests and sensitivities of Canada’s regions and market sectors. |
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How are the affairs of a company regulated?
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By the statute under which it is incorporated, such asthe federal Canada Business Corporations Act (CBCA) or provincial legislation (i.e.: BusinessCorporations Act, Companies Act).
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What do the statutes under which a company is regulated do?
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Govern the structure of a company and how it can carry on business. They addressissues such as proxy solicitations, takeover bids, insider trading and director conduct. They alsoprovide shareholders and other stakeholders with remedies against a company and its directorsand officers in the event of misconduct.
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What conducts and affairs of dealer members occasionally come to the CCO?
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Family maintenanceenforcement programs, matrimonial property orders, estates, collection matters, and civilsubpoenas relating to a lawsuit.
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What can result in special supervision requirements?
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An order such as a garnishment on the income of a registered person is reportable as anamendment to registration information
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Two U.S. (foreign) statutes deal with federal securities matters:
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1) The Securities Act of 1933
2) The Securities Exchange Act of 1934 |
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The Securities Act of 1933
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Requires that investors receive financial and other materialinformation about securities for sale, and prohibits fraud, misrepresentation and deceitrelating to securities sales.
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The Securities Exchange Act of 1934
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Created the U.S. Securities & Exchange Commission(SEC).
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The Securities & Exchange Commission (SEC)
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Has broad powers to regulate securities mattersnationally, including registration, regulation and oversight of a firm’s transfer agents, SROs andclearing agents, corporate reporting by issuers, proxy solicitations, tender offers and insidertrading.
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Which foreign regulator is similar to IIROC?
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The SEC oversees SROs in the U.S., such as the Financial Industry Regulatory Authority (FINRA), which is comparable to IIROC, and the stock exchanges (i.e.: NYSE, AMEX, NASDAQ). FINRA also oversees its Over-the-Counter Bulletin Board.
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Many U.S. laws and SRO rules and by-laws apply to Canadian dealers through registration ofsubsidiaries in the U.S., participation in U.S. marketplaces or dealings with U.S. residents. Theseinclude:
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• Sarbanes-Oxley (audit committee and corporate governance requirements)
• The USA Patriot Act (anti-money laundering and anti-terrorist financing) • The Gramm Act (federal privacy) • state blue sky laws • marketplace trading rules • requirements of the Internal Revenue Service (if the Canadian firm is a QualifiedIntermediary). |
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The SEC and several Canadian Administrators have a Memorandum of Understanding (MOU), which allows what?
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Joint investigations of securities law violations such as insider trading, fraud or inadequatedisclosure.These MOUsare statements of intent and are not legally binding, but facilitate the exchange of information andfoster regulatory co-operation in the global capital markets.
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Securities Investor Protection Corporation (SIPC)
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The U.S. equivalent of the CIPF. On April 13, 2005, the CIPF and the SIPC signedan MOU agreeing to collaborate in the event of the insolvency of a brokerage firm doing businessin both the U.S. and Canada.
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What will have a significant long-term impact on dealers?
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The development of international standards and projects that focus on specific problems, CCOs should be aware of these developments,which may ultimately result in regulatory changes or heightened regulatory focus in Canada.
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INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS (IOSCO)
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Does not implement securities legislation, but facilitates international communicationand harmonization of securities legislation, and it is made up of securities regulators from aroundthe world. IOSCO periodically publishes research reports on issues of interest to internationalsecurities regulators, such as disclosure and accounting, the regulation of secondary markets andmarket intermediaries, enforcement and the exchange of information.
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NORTH AMERICAN SECURITIES ADMINISTRATORS’ ASSOCIATION (NASAA)
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Formed in 1919, the NASAA is an association of securities Administrators from the U.S.,Canada, Mexico and Puerto Rico. Its mission is to protect investors who purchase securitiesor receive investment advice and is the voice of the 50 state regulators. NASAA promotesharmonization of state laws, educates the public regarding investment fraud, participates inmulti-jurisdictional enforcement actions and information sharing, and implements annualtraining for member organizations.
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INTERNATIONAL FEDERATION OF STOCK EXCHANGES (FIVB)
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The FIVB is a trade organization for regulated securities and derivatives markets worldwide,and promotes development and sets business standards for national and international financialmarkets.
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FINANCIAL ACTION TASK FORCE ON MONEY LAUNDERING (FATF)
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The FATF was established by the G-7 countries in 1989. It is an intergovernmental body, and as of December 2006, it was comprised of 31 member countries (including Canada) and two international organizations that develop and promote policies to combat money laundering and terrorist financing. The FATF aims to establish international standards to improve national legal systems and strengthen international co-operation in the fight against money laundering and terrorist financing.
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(NCCTs)
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The FATF maintains and publishes a list of non-co-operative countries and territories. A country might appear on this list because it has no anti-money laundering laws, or because it does not have adequate supervision over its financial institutions to ensure detection of these activities.
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Which rules place the onus on dealermembers to assess the anti-money laundering regimes in the countries of financial institutions theydeal with?
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Canadian anti-moneylaundering regulations and IIROC Rule 1300 on beneficial ownership.
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The successor to the Financial Stability Forum (FSF).
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The FSB (Financial Stability Board) was established in April 2009, with a broadened mandate to promote financial stability.
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Financial Stability Board (FSB)
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In broad terms this mandate is to coordinate at the international level the work of nationalfinancial authorities and international standard setting bodies and to develop and promote theimplementation of effective regulatory, supervisory and other financial sector policies. It bringstogether national authorities responsible for financial stability in significant international financialcentres, international financial institutions, sector-specific international groupings of regulators andsupervisors, and committees of central bank experts.
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What federal statutes affect dealers?
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• The Bank Act
• The Bankruptcy and Insolvency Act • The Canada Business Corporations Act (CBCA) • The Criminal Code • The Income Tax Act • The Personal Information Protection and ElectronicDocuments Act (PIPEDA) • The Proceeds of Crime (Money Laundering) and TerrorismFinancing Act (PCMLTFA) |
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The Bankruptcy and Insolvency Act
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Deals with bankruptcy matters relating to clients,firm employees and the firm (Part XII, Bankruptcy of a Securities Firm).
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The Canada Business Corporations Act (CBCA)
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Regulates proxy solicitations and insider trading for federally incorporated companies.
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The Income Tax Act
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Imposes reporting requirements on dealers regarding clienttransactions that may include document requests or third-party demands for payment offunds from the Canada Revenue Agency (CRA).
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The Personal Information Protection and Electronic Documents Act (PIPEDA)
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Protectsthe privacy rights of individuals and regulates how firms collect, use and disclose client/employee information.
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The Proceeds of Crime (Money Laundering) and Terrorism Financing Act (PCMLTFA)
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Deals with money laundering and terrorist financing activities.
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THE OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS (OSFI)
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OSFI is the primary regulator of federally regulated financial institutions and federallyadministered pension plans, including banks, federally incorporated or registered trust and loancompanies, insurance companies, co-operative credit associations, fraternal benefit societies andpension plans.
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Where does OSFI administer financial institution reporting?
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Under the Regulations Establishing a List ofEntities made under subsection 83.05(1) of the Criminal Code and the United Nations Suppressionof Terrorism Regulations (UNSTR).
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THE FINANCIAL TRANSACTIONS AND REPORTS ANALYSIS CENTRE OF CANADA (FINTRAC)
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FINTRAC is an independent agency at arm’s length from law enforcement agencies that reports tothe federal Minister of Finance. Its mandate is to detect money laundering and terrorist financingactivities, and to assist law enforcement in deterring them. It receives reports filed under PCMLTFAregulations regarding large cash transactions, cross-border movement of funds and suspicioustransactions.
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Who can also conduct audits of financial institutions’ compliance with PCMLTFA regulations,including dealers, and can refer non-compliance to law enforcement agencies for investigation andprosecution?
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FINTRAC
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FINTRAC has legislative authority to issue an administrative monetary penalty (AMP) of up to how much to reporting entities that are in non-compliance with Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
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$500,000
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When does PIPEDA apply?
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When personal information crosses provincial borders
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When does PIPEDA not apply?
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In provinces with “substantially similar” legislation (i.e.: Quebec, B.C. and Alberta)
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IIROC, MFDA, CIPF and MX issued a notice providing that for SRO regulatory purposes when a firm collects personal information from a client, the documentation must include:
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1) a notification describing the purpose for the collection 2) use and disclosure of the information 3) must also explain that the personal information collected can be disclosed and used by the SROs. |
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Who acceptscomplaints from the public regarding the misuse of personal information and can conductinvestigations to determine the validity of the complaint?
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The Privacy Commissioner, or a similar official under provincial privacy legislation
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The Bank of Canada
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Regulates the primary distribution of all Government of Canada securitiesand monitors secondary market activity. It has arrangements with IIROC under which IIROCmay collect information on dealer member activity and positions in Government of Canadasecurities as outlined in IIROC Rule 2800.
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ROYAL CANADIAN MOUNTED POLICE (RCMP)
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The primary enforcer of Criminal Code market offences such as marketmanipulation, fraud and insider trading.
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Integrated Market Enforcement Teams (IMETs)
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Established by the RCMP to more effectivelydetect, investigate and deter capital markets fraud and to restore investor confidence. IMETsinvestigate and prosecute the most serious market-related crimes, and are composed of police,lawyers and other investigative experts.
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What jurisdiction does criminal law fall under?
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Withinfederal jurisdiction though the administration of justice is within provincial jurisdiction.
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What is the main source of criminal law?
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The Criminal Code
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What is the objective of criminal law?
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To maintain a just, peaceful and safe society. Criminal law is also a system of values, and punishment helpscommunicate those values to those who do not comply with the law
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Whats the main belief of Criminal Law?
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Some acts should be prevented, and the threat of punishment achieves this objective. Crime is a wrong against society, not just the victim, and protection of the publicis the responsibility of the state.
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What are the two main sentencing principles when deciding upon punishment?
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1) general deterrence(deterring others from
doing the same thing) 2) specific deterrence (deterring the offender fromre offending). |
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How are offenses classified?
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1) indictable (more serious)
2) summary conviction (less serious) |
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Who can create both indictable and summary conviction offences?
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The federal government
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Who can create only create summary conviction offences?
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The provinces
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What securities-related offences appear in the Criminal Code?
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fraud (s. 380); theft (s. 322); theft by person holding power of attorney (s. 331); misappropriation of money under direction (s. 332); false statement or false pretenses (s. 362); obtain execution of security by fraud (s. 363); forgery (s. 366); uttering a forged document (s. 368); false prospectus (s. 400); and organized crime offences (s. 467.1)
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Under the criminal code, Insider trading is now a criminal offence subject to a maximum of how many years of imprisonment?
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10 years
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Under the criminal code,Protection of whistle blowers (i.e.: it is now an offence for an employee to help an employerintimidate a person who informs or assists a law enforcement investigation of capitalmarkets fraud and it carries a maximum penalty of how many years in jail?
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5 years
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Under the criminal code, what are the penalties for fraud & fraud affecting the public market?
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14 years & 10 years
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What are the aggravating factors listed under the criminal code that permit the court to impose harsher sentences?
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The extent of economic damage caused, negative effect on investorconfidence, market stability, person’s status in the community and any fiduciary capacity.
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Under the criminal code, new investigative tools are available, including Production Orders (general and specific). What are production orders?
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These are similar to search warrants but more efficient and less disruptive. They are usedprimarily to obtain information and documents from financial institutions and third parties(i.e.: persons not under investigation) and compel the custodian of data or records to producerequested information within a specified period.
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Failure to comply with a Production Order can result in a maximum fine & imprisonment of how much?
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$250,000and/or six months’ imprisonment.
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A client who believes that a firm or one of its representatives or employees has committed acriminal offence may file a complaint with who? These complaints involve serious offences such as fraud, theft, market manipulation, forgery and new Criminal Code offences relating to organized crime offences.
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1) A local or provincial police agency,
2) An Administrator 3) The RCMP (typically, the Commercial Crime Section or Integrated Market Enforcement Team). |
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If the police find that sufficient evidence exists to reasonably believe an offence has beencommitted, what will they do?
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They will complete an Information (charging document) sworn before a justice of thepeace
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For a criminal offence the justice will “issue process”, meaning?
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(to compel the offender to answer the charge in court) by either promise to appear, summons to appear or an order to bring the person before the court.
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What must the Crown do in a criminal or Offence Act prosecution?
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Prove, beyond a reasonable doubt, that the act occurred and that there was sufficient intent on the part of the defendant to attract criminal liability.
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What is the standard of proof in administrative proceedings before a regulatory authority?
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The standard of proof is on a balance of probabilities and where the person can be held liable not only if he or she “knew” about an offence, but also if he or she “ought to have known”.
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What are some potential penalties for securities-related offences in a criminal proceeding?
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absolute or conditional sentence; substantial fine; imprisonment (up to 14 years); parole and probation conditions; restitution orders; forfeiture of property; and committal for contempt.
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A breach of client obligations results in a breach of what areas of industry?
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Code of Ethics, provincial securities laws, SRO rules and other civil and criminal legislation
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Dealer and registrant liability usually arises under what principles?
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Common law principles relating to contract law, duty of care, fiduciary duty, duty to supervise, negligence and misrepresentation.
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The party who commences a civil action must prove his or her case on what standard?
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A balance of probabilities (i.e.: more than a 50/50 standard)
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A criminal prosecution is subject to what standard?
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beyond a reasonable doubt.
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bilateral contract
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A dealer member’s relationship with a client is an agency relationship created by contract
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What is theprimary source for determining a firm’s duties and identifying whether they have been breached?
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Client agreements, the agreements are interpreted based on common law and the existing principles from case law.
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What are the two duties that arise under contract law?
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1) A dealer must carry out a client’sinstructions, and if the dealer does not, the dealer must advise the client, so that he or she canmake alternate arrangements.
2) The termination of the relationship.Either party can terminate a contract with appropriate notice to the other party, but failure togive appropriate notice may lead to an action for damages if one party suffers a loss as a result. |
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What are one of the cardinal rules of contract interpretation?
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The court tries to give effect to theintention of the parties, but this can be difficult when the parties’ intentions are not explicitin the agreement.
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When the intentions of the parties are expressed in the agreement, what should the court not do?
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Stray beyond the” four corners” of the agreement and should not consider other evidence as to the parties’ intentions.
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Most client agreements address the following:
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• Give the dealer member the right to refuse to accept any client order when the firm deemsthis necessary for its own protection or for any other reason.
• Provide that no action taken by the firm shall be deemed a waiver of any of its other rights,remedies or powers (a no-waiver clause). • Provide that the agreement can be changed only by written amendment. • Can be terminated only on proper notice. |
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Remedies commonly sought for breach of contract include:
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awards for damages for loss suffered; exemplary or punitive damages; an order that the contract be completed; a declaration that the contract is void and of no effect; and litigation costs.
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Duty of Care
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Dealer members have a duty to provide advice to clients fully, honestly, in good faith and applying skill and knowledge.
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What are the mostcommon actions against dealers for breach of duty of care?
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knowing your client
suitability confidentiality breaches. |
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Know your client (KYC)
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Dealer members must use due diligence to learn the essential facts relative to every client,every account and every order. Client account documentation on file should reflect all materialinformation about a client’s current status to ensure suitability of investment recommendations.
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The primary application of the KYC Rule is to ensure
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The suitability of investmentrecommendations made to clients. All such recommendations must consider a client’s uniquesituation and investment objectives at the time the investment is recommended.
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Any investment professional recommending the purchase of a security to aclient (especially a new or non-traditional product) must first understand
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how the productis constructed and how it is likely to perform in various market conditions. Without thisunderstanding, it is not possible to either assess suitability or explain to the client the product’sfeatures and risks. This is often referred to as the "Know Your Product obligation."
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confidentiality
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All information concerning client transactions and theiraccounts must not be disclosed except with the client’s permission, for supervisory purposes orby order of a court or proper regulatory authority. Violations of confidentiality can result in civilpenalties, as well as penalties under federal and provincial privacy legislation.
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Which law governs fiduciary duty?
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common law
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What are the required elements for elements for fiduciary duty?
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trust, confidence and reliance upon skill, knowledgeand advice
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What relationship will not likelybe characterized as fiduciary?
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The relationship between a client and a discount broker because a fiduciary relationship requires more than an undertaking to simplyprovide information, execute orders or lend money.
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