The Investment Industry Regulatory Organization of Canada (IIROC) issued a notice to its dealer members "encouraging" them to review their agreements with clients to ensure the agreements do not contain terms that violate IIROC requirements and securities laws
What's the problem with client account agreements?
There are investment dealers using client agreements that limit or exclude the dealers liability for client losses caused by the dealer. The offending agreements also contain clauses that state the dealer is excluded from regulatory suitability obligations that are imposed on dealers and their representatives by securities laws and IIROC rules. Agreements also contain clauses that improperly limit the dealers liability for systems malfunctions and for outsourced systems. In some cases, dealers are also using agreements that incorporate a standard of "gross negligence" to describe conduct for which the dealer is liable when such a concept is not defined nor consistent with Canadian law.
What are the problems with IIROC's response?
FAIR Canada has written to IIROC to ask why the regulator is merely "encouraging" dealers to fix these agreements containing terms that violate IIROC rules and securities laws. Why isn't the regulator requiring immediate remedial action and clear communication to clients of the defects in the agreements they have been required by the dealer to sign in order to open an account? FAIR Canada recommends IIROC impose a deadline for such communication with clients and for the signing of new agreements with clients that are in full compliance with IIROC rules and securities laws.
FAIR Canada also recommends that IIROC require dealers to review client complaints during the period when defective agreements were used to determine how many clients with legitimate complaints were not properly compensated due to the dealer relying on the defective agreements, and to provide appropriate compensation.
FAIR Canada has asked IIROC to explain why there are no enforcement proceedings against the dealers
responsible for the use of these deceptive agreements
.
Related:
CBCGo Public recently reported
on financial institutions denying compensation to clients whose
bank accounts were accessed by cybercriminals
to steal money from the accounts.
Go Public found that banks are telling dozens of customers that they were to blame for thousands of dollars lost to e-transfer fraudsters.
Should the cybersecurity measures of the banks infrastructure be the responsibility of consumers or the banks?
When bank customers are victimized by internet "hackers" who gain online access to the customers assets at the bank due to weakness in the banks cybersecurity infrastructure, why are banks denying customers compensation?
