1. 2016 ANNUAL GENERAL MEETING December 7, 2016

2. ACCP 2016 AGM
Manny DaSilva, ACCP Chair

3. 2016 ACCP AGM General Welcome Roll Call
MFDA Enforcement and Compliance Presentation
Shaun Devlin, LLB., Senior VP Member Regulation-Enforcement
Brett Konyu, Manager Member Education

4. Association of Canadian Compliance Professionals
MFDA Update
Presented to the
Association of Canadian Compliance Professionals
December 7, 2016
DM#514710 4

5. Agenda Concentration Deferred Sales Charges and Seniors
Establishing Know Your Client Information
Electronic Communications 5 5 5

6. CONCENTRATION 6 6

7. Concentration
Generally speaking, diversification reduces risk and concentration of holdings increases risk.
MFDA focus on:
Investments in sector specific funds (e.g. resource, emerging markets, precious metals), that are usually high risk.
Investments in high risk, illiquid exempt market products or other illiquid high risk products.
Red flags identified based on:
% of holdings in the account;
% of all the client’s holdings at the Member; and then
% of all financial/liquid assets (i.e. assets held outside Member). 7 7 7

8. Concentration
Bulletin 678-C Review of Specific Policies and Procedures
Considerations for policies and procedures:
How to calculate the concentration limit
preapproval of purchases in higher risk exempt securities
how to assess reasonability and reliability of the value of the outside financial assets, where such assets are used to determine concentration
the use of KYC forms that collect sufficient details of the client’s net investible assets
include review for concentration concerns as part of the daily trade supervision process.
Training of APs and supervisory staff 8 8 8

9. DEFERRED SALES CHARGES AND SENIORS9 9

10. Deferred Sales Charge Sweep
MFDA conducted a DSC sweep in 2015
Reviewed trading activity for a 12 month period for select Members
Looked at over 600 DSC trades
There was a focus on senior clients
Issued MFDA Bulletin #0670-C – 2015 DSC Sweep Report on December 18, 2015 10 10 10

11. Deferred Sales Charge Sweep
General findings regarding age:
Most policies did not have guidance regarding age
Most policies did not comment on time horizon in relation to client’s age
Supervision of redemptions focused on disclosure of the charge, and not the suitability of the charge
Noted instances where fee disclosure was not provided for estate liquidations
Noted a number of DSC purchases in client RRIF accounts and/or for elderly clients 11 11 11

12. DSC Sweep – Good Practices & Recommendations
Policies and procedures regarding age:
assess the reasonableness of the client’s time horizon considering the client’s age
restrict or query purchases for seniors
restrict or query purchases in RRIF accounts
review DSC redemptions with charges 12 12

13. ESTABLISHING KNOW YOUR CLIENT INFORMATION13 13

14. Best Practices for KYC Use KYC definitions Use standard forms
Use questionnaires
Have a Member policy for updating KYC information within a specified time-frame
Perform KYC updates with same rigour as original KYC discovery process 14 14 14

15. Best Practices for KYC
Simply asking the client “Has anything has changed?” may not be clear to the client that you are asking about all KYC information
If you are not re-documenting the KYC information in full, complete a review of the specific current KYC information on file with the client on a regular basis and document the discussion or have the client sign a new form
Identify potential KYC issues via branch examinations, complaint handling and supervisory queries
Conduct regular training 15 15 15

16. Documentation Notes and Observations
Notes and observations (in addition to complete instructions and authorization) are an integral part of the Advisor’s and Member’s evidence of compliance with requirements
Notes are the details of the conversations, reasons for decisions made, facts, concerns and next steps
Observations may include behaviour, emotions, level of understanding (e.g. when discussing risk and reward) 16 16 16

17. Documentation Notes and Observations
Use of standard trade and KYC forms alone are not enough because:
Forms do not always account for special circumstances and situations
Forms are not typically used to record conversations that preceded the transactions or when no transactions took place
Could use a standard Meeting Notes form that is designed to record notes and observations from meetings. 17 17 17

18. Elements of Good Notes and Observations
Date, time, location and method of communication
e.g. phone or in person
Stored in a standard location
e.g. in client file or contact management system
Sufficient detail on the material points of the discussion
discussions about various client life events
Are precise
For example, “KYC reviewed with client” is too general since it is unclear what was done to review KYC
Just asked a question? “Has your KYC has changed”? vs
a full review of each KYC component, with definitions and client confirmation that nothing had changed. 18 18 18

19. Elements of Good Notes and Observations
Document notes as soon as possible
Document any tools used and maintain handouts provided
Include observations where appropriate
Consider follow-up communications
Where no decision was made, there is less audit trail. It may be appropriate to confirm your understanding of the discussion through a follow-up letter or .
Do NOT use follow-up communications to pass on liability (i.e. will not save you from an unsuitable recommendation) 19 19 19

20. ELECTRONIC COMMUNICATIONS20 20

21. Electronic Communications
Use of personal
Part of Member books and records
Privacy
Security
Use of Member
Privacy concerns still remain
Evidence of delivery
Trade instructions
If under an Limited Authorization, confirm with the client via phone
Use of a secure portal 21 21 21

22. Questions? 22 22 22

23. 2016 ACCP AGM
Approve Agenda
Approve Minutes
Treasurers Report

24. 2016 ACCP AGM
ACCP Board for 2017
Best Practices / MFDA Presentation Discussion
OSC Roundtable for Stakeholders – CSA Consultation Paper
MFDA Bulletins - NIL

25. 2016 ACCP AGM ACCP Conference Update
ACCP Compliance Professional Achievement Award
Other Business
Next Meeting – Friday, January 27, 2017