Compliance Examinations
Certain market participants that trade or advise in securities in Nova Scotia must register under section 31 of the Securities Act, unless they rely on a registration exemption.
Compliance examinations are the main tool we use to monitor registrants. Examinations help ensure that registered firms have a compliance program in place and are conducting their activities in accordance with Nova Scotia securities laws. The authority to conduct examinations is set out in section 29E of the Securities Act.
The Examination Process
Prior to the examination, we send the chief compliance officer (CCO) of the registrant a letter authorizing the examination under section 29E of the Securities Act and a list of books and records to prepare in advance. If fieldwork is being conducted, upon arriving at the registrant's office, the examiner will speak to the CCO and conduct an initial interview.
Examination Fees
Subsection 29E(3) of the Securities Act allows the Commission to require a registrant to pay prescribed fees for the costs of the examination. Examples of situations that might trigger these fees include when a registrant:
- Fails to provide records to compliance examiners in a reasonable time.
- Requires excessive attention from Commission staff (e.g., failure to answer questions or allow staff to interview employees).
- Fails to resolve past compliance deficiencies.
- Fails to maintain proper records.
During the review, examiners look for compliance evidence, checks and balances, and specific practices to determine if effective internal controls are in place:
- Overall compliance processes
- Account opening practices
- Contracts and disclosure
- Products offered
- Working capital and financial condition
- Marketing
Registrants must maintain records per NI 31-103. Samples of documents we regularly review include:
- Policies and procedures manual
- Financial and working capital records
- Client records, files, forms, and contracts
- Fee schedules and calculations
- Complaint and correspondence files
- Marketing and social media activity
- Referral arrangements and conflict of interest disclosures
Examination Outcomes
A compliance examination report will be provided once the examination is completed. The examination report will be sent to the registrant and will require a response with a plan of action to resolve the deficiencies. Findings may be addressed in one or more of the following ways:
Deficiency Letter
A letter requesting a response to the deficiencies and a written plan to resolve them.
Conditions / Suspension
If problems are very serious or systemic, the Executive Director may impose conditions or suspend registration.
Enforcement Referral
The examiner may refer very serious problems to our Enforcement Branch for further investigation or action.