Tuesday, September 20, 2016

Did you ever wonder what regulators mean when they say a broker has been placed under “ Strict supervision”?

Brokers aka " advisors" are put under Strict supervision when they have been found by regulators to have broken the rules, thereby putting clients at risk. If after some defined period ,it is concluded that they can be allowed to work with clients with just the normal level of supervision, they are removed from the strict supervision status. For major breaches of the rules, brokers can lose their registration and not be employed by any member firm as determined by the applicable Self- regulator ( MFDA or IIROC). If your dealer Rep is under Strict Supervision be ultra cautious with any recommendations made.

The Eight Traditional Elements of Strict Supervision are:

i.     All  orders, both buy and sell, would be initialed by an assigned supervisor or a senior officer before entry;

ii.    ii. All client accounts would be reviewed on a daily and monthly basis based on the standards established by the Minimum Industry Standards for Account Supervision;

iii.   A review of trading activity in the Respondents own accounts would be conducted on a daily basis;

iv.     No transactions would be made in any of the respondents  new client accounts until full and correct documentation was in place;

v.    All documents signed by the Respondents clients would be reviewed by the Branch Manager and compared to the signature on the client’s photo ID. Evidence of such review would also be retained by the Branch Manager;

vi.   For all documents signed by one of the Respondents clients, a Branch Manager would send a copy of the document back to the client with a request for them to inform Dealer of any discrepancies.

vii. Any of the respondents client complaints received would be reported to the Registration Department of IIROC;

viii.                Any of the Respondent's client account generating in excess of $1,500 per month in commissions would be reviewed;

Ohers can be added to this traditional list of eight depending on the circumstances and tailored to the specific situation such as, but not limited to:

ix.  There would be no handling by the Respondent of any of his clients’ securities and no payment by the respondent  or issuance of cheques by the respondent to his clients without management approval;

x.    x. Any transfer of securities between the respondent's client accounts would be authorized by the client and reviewed and approved by an assigned supervisor or a senior officer of the Dealer Member

You can check advisor registration at https://www.securities-administrators.ca/nrs/nrsearch.aspx?ID=850  

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