Self-regulation and compliance enforcement practices by the Investment Dealers Association in Canada

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Issue Date
2017
Authors
Lokanan, Mark
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Subject
Fraud
Self-regulation
Public interest
Abstract
Purpose: This paper aims to examine the enforcement practices of the Investment Dealers Association of Canada (IDA) and argue that self-regulation simply does not work in the financial sector, as the sanctions available are neither applied with sufficient severity nor are the responsibilities for enforcement adequately divided between self-regulation, provincial securities commissions and the police. Design/methodology/approach: The core compliance data for the study came from the IDA’s tribunal cases that were heard between 1984 and June 2008. The theoretical approach involves the invocation of classic articles by the likes of Stigler, Posner and Becker, the essence of whose conclusions is that institutions will act in their own best interests and cannot be expected to act in the public interest. Findings: The findings show that over the period from 1984 to 2008, the severity of the sanctions increased consistently over the period. When penalty ceilings were increased, penalties increased. When in the latter phase of the period, public members (i.e. non-members of the industry) chaired the tribunals, penalties also increased. Research limitations/implications: Researchers can use the data to write a paper which asks “Why did the IDA tribunal penalties increase so consistently with time?” Future research could canvass various possible explanations, including the one presented in this paper, to focus sustained attention on the issue of self-regulation. Originality/value: This study is the first to systematically examine the enforcement performance of the IDA.
Description
This pre-print version is deposited under a Creative Commons Attribution-NonCommercial 2.5 Canada License. Permission has been granted by Emerald Publishing Ltd. for this version to appear here. If you wish to use this manuscript for commercial purposes, please contact permissions@emerald.com. The version of record is available at https://doi.org/10.1108/JFRC-04-2016-0038.
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