The British Columbia Securities Commission (BCSC)’s most recent Compliance Report Card of investment dealers and advisers reflects the past year’s focus on marketing materials these firms use to attract and retain clients.
The Report Card highlights several recurring deficiencies in how some B.C.-based portfolio managers, investment fund managers and exempt market dealers hold themselves out to the public, including:
- Posting information and marketing materials that are no longer current,
- Unsubstantiated and/or overly promotional claims,
- Failure to provide references and sources for third-party information used in marketing materials, and,
- Making social media posts that have misleading or overly promotional claims and statements.
The focus of the Report Card on marketing in 2021 was part of a national effort, coordinated by the Canadian Securities Administrators, of which the BCSC is a member. The goal of the report card was to pinpoint problems before they arose with expectation that marketing efforts are carried out in a responsible manner by registrants.
In 2021, the BCSC conducted 31 compliance reviews and found 210 deficiencies, averaging 6.77 deficiencies per review. This is down from an average of 8.14 deficiencies per review in the previous year, in large part due to the narrower focus on marketing.
The reviews also revealed that some firms are falling short of requirements to Know Your Client (KYC) and their obligation to determine the suitability of investments for each client.
Some firms that recently registered, following the repeal of the Mortgage Investment Entity (MIE) registration exemption, are falling short in certain areas.
Some of the deficiencies, either in marketing or other areas, were significant failures of compliance that led the BCSC to impose terms and conditions on registration, such as requiring the hiring of a compliance monitor or preventing new clients from being onboarded until the failures have been corrected. The BCSC put restrictions on several registered firms this year. In addition, several cases were referred to the BCSC’s Enforcement Division for further investigation, which could lead to public allegations of misconduct, a hearing and possible sanctions. During the year, the BCSC reports it has made settlements with several firms based on poor registrant conduct, as well as imposing sanctions on individuals for registration matters.
The 2021 British Columbia Securities Commission Compliance Report Card is available for download from the BCSC website.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.