1. CCLS Education -- Calgary Breakfast Seminar June 13, 2019

2. Supervision: Advisor Compensation Conflicts
Panel Speakers
Richard Korble, Director, Prairie Region, IIROC
Jamie Mihalicz, Director, Compliance & Supervision, ATB Securities
Govind Achyuthan, CCO, Acumen Capital Partners
Moderator
Brian Pynn, Managing Director Compliance, ATB Wealth

3. Relevant Publications & Rules
Guidance Notice Compensation-related Conflicts Review
Guidance Notice IIROC Compliance Priorities
2018 Enforcement Report
numerous 2018 actions directly related to compensation conflicts
Rule 38 - Compliance & Supervision
Rule 42 - Conflicts of Interest

4. Fee-Based Accounts
Dealer Members must exercise reasonable diligence to monitor fee-based accounts
Frequency of reviews? Data reviewed?
New issues concerns/considerations
Double-dipping = low hanging fruit...but other product reviews are much more subjective. Who decides how much an advisor should earn and on what products?

5. Product-Based Compensation
KYC, KYP, KYCG?? (Know Your Compensation Grid)
Are compliance departments or individual supervisors aware of how their advisors are compensated & bonused?
Potential pitfalls to be aware of, red flags to monitor, when compensation grid is not product neutral?
Examples of product compensation gone awry?

6. Gifts, Entertainment & Sales Incentives from 3rd Parties
How much is too much?
Should policies be based on bright line dollar-value, or be fluid and consider the likelihood of an individual’s behaviour to be influenced?
Beyond self-reporting and disclosure requirements, how can firms monitor for undue or excess influence from gifts and incentives?

7. Internal Sales Target Campaigns
Compliance teams should be aware of these campaigns but many occur without compliance oversight
Are they product neutral?
Bonus/reward programs that should be supervised?
President’s League, Top Producer, etc.
All-expenses paid annual trip for top asset gatherers
Establish reporting/review as contest nears completion; monitor activity of those closest to cut-off?

8. Referral Arrangements
NI Section 13 provides specific regulatory requirements
Disclose all formal referral arrangements (i.e. Relationship Disclosure Document)
However, can’t simply disclose your way out of conflict that should be avoided
Non-compensated informal referrals as part of COI; employee disclosure required? Reputational risk to firm?

9. Wrapping Up: Tips & Tactical Takeaways
Compliance must establish relationship with Advisory, HR, Finance, etc.
understand how reps are compensated, period, but also when special incentives are in play
know advisors on performance management
Automated daily account supervision plus manual monthly & quarterly reviews of fee-based accounts
ensure sample size is realistic enough to capture a full picture
Additional reviews to cross-reference 3rd party product transactions/holdings against advisor attendance at promotional events
Additional reviews as internal sales bonus programs near close
Assess potential behavioural impacts of gifts & incentives based on value and frequency
Annual disclosure requirements for registrants (OBAs, referrals, etc.)
supervision program - key words & phrases are your friend!

10. Questions!
On behalf of the entire CCLS Education Sub-Committee, thank you very much for your attendance and attention today!