It is important to check the registration of any firm or individual who sells investments or other financial products before handing them your money. You need to ensure that they are registered (i.e., licensed) with an investment regulator. Registration means that the firm or individual has met basic requirements to sell investments. This is a first step in protecting yourself against fraud, and FAIR Canada therefore recommends that you deal only with registered investment firms and registered investment advisors.
Investments are regulated primarily by provincial and territorial securities commissions. Many investment firms and investment advisors are also governed by industry self-regulatory organizations (“SROs”). The two SROs in Canada are the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Mutual Fund Dealers Association (“MFDA”). Here are the steps you can take to check whether a firm or an advisor are registered with any of these investment regulators:
1. Are They Registered?
AreTheyRegistered.ca provides a link to the National Registration Search website. Here you can search the name of an “individual” or “firm”. Check the registration of both the advisor and the firm before you invest.
2. Have They Been Disciplined?
Has the advisor been disciplined by one of the regulators? Check Disciplined Persons List. If the advisor has a history of disciplinary action, this is a red flag. You should make sure you fully understand any proceedings brought against them before investing, or find another advisor who does not have a disciplinary history.
3. Are They an SRO Member?
Generally speaking, members of SROs are subject to a closer level of regulation and supervision. SRO member firms also are required to participate in compensation funds that may provide restitution to investors in the event of firm insolvency. Go to CIPF and IPC for details of coverage.
4. Check Certifications and Designations
IIROC provides a glossary of financial certifications and designations to help investors sort through the large number of certifications and designations in use by financial professionals. The glossary also sets out the requirements for obtaining these certifications and designations.
Also check FAIR Canada’s Five Rules for Avoiding Investment Fraud for more helpful information.