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BC Securities Commission finds compliance deficiencies on the rise

Compliance dips: BCSC

More investment advisors are bending the rules in B.C., according to new data from the B.C. Securities Commission.

BCSC examiners uncovered 241 compliance deficiencies in 2019 and 285 in 2020.

The average deficiencies per review have also increased from four in 2016 to to 8.93 in fiscal year 2019 and 8.14 in 2020.

In its latest compliance report card, the BCSC said client statements and promotional statements were the most problematic areas among investment advisers and dealer firms.

“The vast majority of registrants work hard to comply with all their obligations,” said Peter Brady, the BCSC’s executive director. “Our reviews seek to fix problems before investors get harmed, and to reinforce the need for firms to be responsible stewards for their customers’ investments and financial well-being.”

The regulator conducted 27 compliance reviews in 2019 and 35 in 2020.

The most frequent deficiency is in client account statements and reporting, including failure to provide transaction information on account statements, trade confirmations, and an annual report on fees and other compensation.

Deficiencies in advertising, marketing and other promotional activity – such as making unsubstantiated claims, mentioning the benefits of an investment but not the risks, and failing to label performance results as hypothetical – are the second-most common area of non-compliance.

“As firms seek to attract or retain clients, marketing seems to have become bolder,” said Mark Wang, the BCSC’s Director of Capital Markets Regulation. “We want to make sure it’s done responsibly.”

When the BCSC discovers significant weaknesses, it can impose restrictions on a company's registration or refer them to its enforcement team for further investigation.



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