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    Posted April 26, 2013 by
    Toronto, Ontario

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    IIROC Mislead the Investing Public

    Investment Industry Regulator knew for months about the loss of mobile data device containing personal financial information of more than 50,000 Canadian investors.

    What is going on at IIROC? It has been discovered that the Investment Industry Regulatory Association of Canada, covered-up the news of the loss of a mobile device containing detailed personal financial information of some 52,000 Canadian investors, for nearly two months leaving clients and the investing public completely exposed. Member firms are calling for the firing of IIROC CEO Susan Wolburg Jenah who appears to be trying to dismiss the incident as “Isolated”.

    What is even more disturbing is IIROC’s press release which tried to paint a picture of a rapid response to the problem, when in fact the data loss happened some time before the end of February. Some affected firms were not told until early April, industry sources said. Letters informing individual clients went out just last week. IIROC publicly disclosed the loss April 11, when it issued a news release that was clearly designed to give the false impression that the incident had just occurred and that in a matter of a day they had rallied to address it. But nothing could be further from the truth.

    IIROC spokeswoman Lucy Becker said Thursday that “we moved as quickly as possible under the circumstances” and the regulator will be discussing the industry association’s concerns with IIAC.
    No suggestion was made of any form of town hall, or open dialogue with member firms or the investing public. Ms. Becker confirmed that IIROC learned of the device’s disappearance in late February, but she declined to give an exact date or any reasonable explanation for the delay out of, “Concern that doing so might put client data at further risk.” This seems to be the catch-all excuse used by IIROC to avoid the obvious; They deliberately mislead the public.

    “There’s a lot of questions we have and not really very many answers,” said Ian Russell, the head of The Investment Industry Association of Canada (IIAC), the industry group representing investment dealers. “The extent of the delay is something we are unsure of. Obviously it is something that is of critical importance because clients need to be informed at the earliest possible time to protect their interests. So is the explanation adequate for the delay?”

    IIAC has sent a letter to the Investment Industry Regulatory Organization of Canada (IIROC), demanding to know why the brokerage community was not notified sooner about the loss by IIROC of detailed information on clients of 32 firms.

    IIROC said it hired a third-party expert to recreate the information, which took until March 22. At that point, the regulator began preparing letters for each of the affected individuals to contact them directly, Ms. Becker said. Firms were contacted individually.

    “Our desire was to inform those affected as quickly as possible and in order to do so in a responsible manner, we needed a thorough understanding of the information on the device,” she said in an e-mailed response to questions. The letters explained that IIROC was setting up a dedicated call centre in each official language, and that a credit alert would be placed on the credit files of the individuals.

    The loss led Ontario’s privacy commissioner to tell the industry publication Investment Executive that she was “appalled.” The office of the Ontario privacy commissioner, in a guide to best practices in such a situation, says that one of the first priorities is to identify whose privacy was breached and “barring exceptional circumstances, notify those individuals accordingly” with details on the lost information. However, the commissioner also said that they lacked any jurisdiction to investigate this matter which leaves everyone asking, “Who really is protecting the public interest?”

    “The industry has had enough pontificating from IIROC. Their constant BS about protecting the public interest along with their self-serving portrayal of the member firms as dishonest has to be tested against this cover-up, which is just another reckless and arrogant affront to the member firms of IIROC and their clients,” said one CEO of a major firm. Another CEO at a boutique firm said that he had also called IIROC but was dismissed, and passed off to the PR department. “We pay for IIROC. We are their sole source of their funding. Yet they refuse to deal with us in a respectful, honest and transparent manner even in the midst of a disaster like this?”

    “I’ve know my broker for 24 years and I trust him to manage my money. Who is IIROC? And who said they could remove my confidential information from my broker without my permission?” said one client who says that he called IIROC but was passed off to a public relations person by IIROC’s receptionist who said she was told to, “Screen Calls” regarding the data loss incident.

    Mr. Russell said the first the industry association heard of the situation was from the press release of April 11. He said IIAC was concerned that it was not consulted early on because “we could have been very helpful” with such matters. Industry sources say this is no real surprise since IIROC tends to be dismissive of the concerns of member firms which are represented by IIAC.

    Mr. Russell said he is now seeking assurances that his members will not be asked to pay for something that was not their fault. The brokerage community funds IIROC through fees, and he argues investment dealers should not have to cover the expense of a “fairly costly” process to deal with IIROC’s loss of the data. Instead, he urged that monies set aside from fines levied by the regulator be used to cover any costs for such things as data reconstruction and call centres.

    He pointed out that if a brokerage firm failed to disclose a loss of client data immediately there would be consequences. “There would be very severe repercussions on a member firm if a similar episode would have happened at the firm,” he said, adding that “regulators have to be held to the same high standard as the industry.” IIROC, under Ms. Jenah has turned the regulator into a mercenary money machine in recent years leaving behind the proactive approach of former IIROC CEO, and now Federal Minister of Natural Resources Joe Oliver, and adopting a large stick approach to regulating the industry.

    “We used to be fully engaged with the IDA (IIROC’s predecessor”),” said one compliance officer at a national firm. “We used to be able to rely on them for guidance and if we had issues we would call to discuss and they would help us to come up with solutions. Today they are always trying to trip us up so they can fine us. It’s all about appearances now! They are trying to justify their own jobs by inventing problems that don’t exist. And now we find they have been lying to the public from day one of this fiasco.”

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