On January 20, 2025, the IIAC submitted a response to CIRO’s Request for Comments on its proposal for distributing funds that are disgorged and collected through disciplinary proceedings to harmed investors. CIRO’s Request for Comments mirrors another proposal that was made by the OSC in 2024.

According to CIRO’s proposal, CIRO intends to create a framework to redistribute the funds that it receives from respondents in disciplinary proceedings. This proposal would involve creating a parallel claims process for harmed investors to seek recovery directly from CIRO. Access to this claims process would be limited to investors that have suffered a direct loss because of breaches in securities law. 

As set out in the IIAC’s response, CIRO’s proposal suffers from notable shortcomings that are likely to undermine the effectiveness of the proposed framework. In particular, based on the Request for Comments, we understand that CIRO’s proposal is limited in scope and excludes payments that are received by CIRO in respect of administrative penalties and/or approved settlement agreements.

Given that a considerable number of disciplinary proceedings are resolved by way of settlement as opposed to contested hearing and given that the frequency and amount of a disgorgement order may vary, we have concerns as to whether CIRO’s proposal will provide investors with a meaningful form of redress. To have an impact on harmed investors, CIRO ought to broaden the scope of its proposal.