Electronic reporting leads to jump in IDA complaints

(January 26, 2004) The self-regulatory organization for Canada’s brokerage industry received more than 1,500 complaints in 2003, the first full year IDA members were required to report all complaints electronically.

The number of complaints the IDA received last year was up 41% compared to 2002, mostly as a result of information collected through the association’s new complaints and settlements database, known as ComSet, says Alex Popovic, the IDA’s vice-president of enforcement.

In October 2002, IDA firms began reporting all public and civil complaints — as well as any criminal or regulatory investigations — to ComSet.

Before that, client complaints might have been resolved by firms internally without the IDA’s awareness, explains Popovic. “With ComSet, we know as soon as the complaint is made and can intervene if we choose to.”

Popovic says he’s not concerned about the rise in the number of complaints. “It just shows that we are now much more efficient in gathering information from a variety of sources, both internally and externally.” More than 700 complaints received through ComSet were referred to the IDA’s complaints unit.

Despite the rise, only 155 complaints remained unresolved at the end of 2003, down from 2002. The IDA attempts to close the majority of cases within 75 days of receiving the complaint. The current average is 32 days, Popovic says.

More than 400 complaints regarding unsuitable or discretionary trading were logged by the IDA in 2003. Nearly 300 were about unsuitable investments.

“You’re always going to have people concerned about whether or not the advice they got about a public issue was suitable, particularly when they start to lose money,” says Popovic. “It’s somewhat of a subjective issue. In some cases, the advisor was wrong, but in others the market simply went against the client.”

Other common complaints were misrepresentation (145), service issues (90), poor performance (57) and inappropriate personal financial dealings (47).

The IDA’s district councils issued 47 disciplinary decisions and sent out 40 warning letters in 2003.

Nine brokers received permanent industry bans, two were suspended, and 19 had conditions imposed on their approval. The biggest fine imposed last year was $585,000 against Warren McCaffrey, accused of diverting and misappropriating funds in client accounts, as well as falsification of documents and forgery. McCaffrey also received a lifetime ban. One firm’s membership, Roche Securities, was terminated in 2003.

Total fines and costs imposed against individuals topped $3.2 million last year, up from $2.6 million in 2002. Fines and costs assessed against firms were $265,000 in 2003.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com