IDA Complaint Handling and Investigation Software: There's no where to hide from the IDA
The IDA probes up to 1,500 complaints annually and when fault is found 'people who want to stay in the industry usually pay up'
The IDA complaint handling and investigation software is a customized version of the i-Sight case management software, which they have renamed “Comset”. Every financial institution in Canada is obligated to report consumer complaints to the IDA using the i-Sight (Comset) software.
Article: National Post
Tuesday, November 9, 2004
Section: Financial Post: Advisor Post
Byline: Jade Hemeon
Source: Financial Post
Toronto – November 9th, 2004 – The world of securities transactions is a big place, with 24,000 members of the Investment Dealers Association of Canada (IDA) conducting some 35 million transactions a year. That leaves a lot of scope for things to go wrong, and the IDA investigates 1,200 to 1,500 complaints per year, says Alex Popovic, vice-president and head of the IDA's enforcement department.
About 20% of complaints result in formal investigations and of those about 40 to 60 result in full-fledged IDA hearings. So far this year there have been 54 hearings, resulting in $4.4-million in fines.
Most investigations result in negotiated settlements rather than hearings, says Mr. Popovic, who spoke about regulatory challenges at a recent IDA conference in Toronto. Fine collection can be tricky, with a minority of fines "paid right off at the get-go" and others taking longer. The IDA has the ability to collect fines with the help of various provincial securities commissions as well as civil proceedings in some provinces. In Alberta, an IDA decision is deemed to be a decision of the court, with access to property and wages if fines aren't paid.
"People who want to stay in the industry usually pay up," says Mr. Popovic, who previously spent 28 years with the RCMP including 14 in the commercial crime area. "Some go bankrupt, and you can't get blood from a stone. We do have the power to ban people from the industry, and they are effectively barred for life if they don't pay their fines. It's a powerful tool to be able to take away someone's livelihood."
The biggest number of complaints relate to client suitability issues and discretionary trading.
"Often the client has not been educated to the fact that they may lose money in the market," Mr. Popovic says. "The most complaints are from investors who have been put into unsuitable investments without their knowledge, and they are very vocal."
Some complaints are service issues rather than regulatory issues, such an advisor's rudeness.
"Some people simply want to get their money back, and that's not our forum," Mr. Popovic says. "If there's been unauthorized trading or money has been stolen, that is our concern. Some issues are criminal and we report those to the police. If they don't follow up, we will."
Any failure to co-operate with the IDA in an investigation turns the case immediately into a hearing, Mr. Popovic says. The IDA can impose fines of up to $1-million on individuals and up to $5-million per offence on firms, as well as suspend or permanently cancel registration. Sometimes new office procedures or training are required.
Firms can help prevent complaints through proper documentation of goals and risk tolerance characteristics when an account is opened, followed by strict adherence to these objectives, says Larry Boyce, vice-president of sales compliance and registration for the IDA.
"It's not always an exact science to define what is a growth stock and what is a speculative stock, but we look for significant discrepancies in risk relative to client objectives," Mr. Boyce says. "The more clarity at the outset when an account is opened the less chance of problems down the road."
Privacy issues make it difficult for firms that are hiring advisors to ask previous employers about their track record. Only in B.C. is a previous employer obligated to provide information. The IDA Web site has a record of disciplinary hearings, although it maintains silence on ongoing investigations. Public data bases such as newspaper archives and lawsuit filings can be useful information sources for firms that are hiring new advisors.
For the past two years, the IDA has used a Web-based reporting system called Comset, which requires firms to report any complaint received in writing or any disciplinary matter, whether it's regulatory or criminal, national or international. Any complaint regarding theft, fraud, forgery, money laundering or manipulation must also be reported, whether it's in writing or not.
"Using this tool, we've been able to identify risks as well as trends," Mr. Popovic says. "We can recommend that a firm review certain compliance procedures or focus more resources on a particular problem. Firms can also look at their own Comset data to identify problems and make improvements in management or supervision. If there are good supervisory systems, problems are usually minimized, although there's always a small percentage of people who are true rogues."
The IDA has also hired a consultant to help revise the format of its rulebook, and make it easier to search specific topics on the Internet.
"The major issue that firms have to deal with is the regulatory burden," says Paul Bourque, senior vice-president of member regulation for the IDA. "It's more important than the issue of a national securities regulator. We are looking at ways to deliver more effective and timely information on our Web site and through the Internet."
About Customer Expressions
Based in Ottawa, Canada, Customer Expressions(www.customerexpressions.com) is a leading provider of web-based case management solutions for regulators and enterprises focused on quality assurance and customer service. Customer Expressions has gained an international reputation for best-in-class software that enables managers to improve customer retention and profitability. The privately held firm provides i-Sight, integrated case management software for complaint handling, corrective and preventive action management (CAPA Management), compliance monitoring, and other business processes that require case management.
For further information, please contact:
Joe Gerard, Vice-President, Sales & Marketing
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