The Haney Group News Report Articles ビジネス
A sweep of exempt market dealers by the country’s largest capital markets regulator found “substantive” problems that were deemed “unacceptable” by staff of the Ontario Securities Commission.
Nearly one-fifth of the dealers reviewed by the OSC were selling securities to people who did not fall into the required category of an “accredited” investor. Accredited investors meet minimum income or asset ownership thresholds.
Three-quarters of the dealers had “inadequate” processes for collecting, documenting and maintaining information about clients including their investment objectives and risk tolerance.
And 22% of the dealers in the sweep made inadequate investment suitability assessments due to inadequate paperwork on how suitability determination is made.
The exempt market, where securities are sold without a regulator-vetted prospectus document, has come under greater scrutiny from the OSC in recent months. At the same time, Canadian regulators are considering whether even more fundraising options should be opened up through mechanisms such as crowdfunding.
Crowdfunding pools small contributions from a large number of investors in exchange for securities.
The idea gained traction with the U.S. JOBS Act last year, but the OSC has already noted that this method of fundraising, particularly through the Internet, “may raise heightened concerns regarding the potential risk of fraud and abuse.”
According to the OSC, at least $86.5-billion was raised through the exempt market in Ontario last year.
Among the inadequacies unearthed by the OSC sweep of 42 exempt market dealers were instances where dealers appeared to be encouraging investors who were not accredited to put “a high proportion of their investable assets in a single product solely to allow” the dealer to rely on a prospectus exemption that applies minimum investments of $150,000.
“We have identified these concerns as significant deficiencies with the EMDs (exempt market dealers) in question and are considering further regulatory action,” the OSC report said.
Another area of concern for the regulator was the “misuse” of a provision that allows a client to direct a trade even if the firm is of the opinion that it would not be suitable for the client.
“A registrant cannot actively promote a security (and thereby recommend a security) and then rely on boiler plate language to say this was a client-directed trade and is not recommended,” the OSC report said.
“This is not acceptable and Staff will consider further regulatory action in these circumstances.”
Along with exempt market dealers, the OSC also conducted a sweep of portfolio managers, and the regulator issued “deficiency reports” to 62% of the registrants reviewed. Two exempt market dealers and one portfolio manager discontinued operations after the regulatory review, according to the OSC report.
In two cases, one exempt market dealer and one portfolio manager, the regulator “identified a large number of significant deficiencies which raise significant investor protection concerns,” the OSC said. “We have taken further regulatory action in both cases.”

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