OSC Identifies Compliance Issues In KYC And Suitability Reviews

Last week, the Ontario Securities Commission Compliance and Registrant Regulation Branch released the results of its targeted compliance review of portfolio managers and exempt market dealers. Specifically, the review sought to assess compliance with know-your-client, know-your-product and suitability obligations found in NI 31-103.

With respect to EMDs, the review ultimately found a number of substantive issues deemed unacceptable by Branch staff. Issues identified by staff included (i) sales of securities to investors that did not qualify as accredited investors; (ii) inadequate suitability assessments (including due to concentration risk); (iii) misuses of client-directed trade instructions; (iv) in appropriate disclaimer language in client documentation; (v) improper delegation of KYC and suitability obligations to third parties; (vi) inadequate relationship disclosure information; and (vii) lacking or inadequate policies and procedures.