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IDA sets guidelines for investor restitution

The Investment Dealers Association of Canada will seek restitution for aggrieved investors more often in cases that fit a list of new criteria, chief executive officer Joe Oliver said yesterday.

Mr. Oliver said the IDA -- a self-regulatory organization responsible for policing brokerage firms and their employees -- will ask its disciplinary panels to provide restitution for investors when it is straightforward to do so, helping more investors recover their losses.

"Clearly a wrongdoer should not profit from his misconduct, and a victim should not suffer from it," Mr. Oliver said in a luncheon speech yesterday to the Canadian Club. "And that is the basis of the law of restitution."

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He said a case must fit five criteria before restitution will be awarded: there are funds available; the loss is clearly attributable to the misconduct; the individuals entitled to restitution can be clearly identified; the amount can be readily ascertained; and the funds can be easily and efficiently distributed.

In an interview after his speech, Mr. Oliver said many cases will not fit into the narrow criteria, so restitution will not be a "panacea" for all investors.

"We're signalling that we will do it where we can, but we won't be able to do it in a lot of cases for practical reasons," he said.

For example, in some cases a broker has left the industry and is no longer registered with the IDA, so there is nothing the regulator can do to enforce a restitution order. In some cases, the IDA can't find a full list of a broker's defrauded clients because the fraud was being done secretly. Other cases can involve inappropriate trading activity on stock markets where it is difficult to determine who deserves restitution.

"I just don't want to raise expectation on the part of the public that this is going to be used in a majority of cases, because the circumstances won't permit it," Mr. Oliver said.

He noted that the Manitoba Securities Commission won the right four years ago to order restitution, and has only granted it in one case so far.

"That demonstrates the difficulty in finding the right circumstances," Mr. Oliver said. "I think we ought to do it where we can."

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Also in his speech yesterday, Mr. Oliver said he believes it is "inevitable" that the IDA will eventually merge operations with the Mutual Fund Dealers Association. While the IDA is in talks to merge with Market Regulation Services Inc., the MFDA has flatly rejected the prospect of a merger.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


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