The Complaint That Should Have Been Reported
A dealer member receives a written complaint from a client alleging that a representative made unauthorized trades in her RRSP over an 11-month period, totaling roughly $85,000 in principal. The branch manager investigates, concludes the client 'probably authorized the trades verbally,' and closes the complaint with a letter to the client. The complaint is logged in the branch's internal complaint register but is not escalated to the compliance department, and the rep remains on the account. Six months later the client escalates to the regulator, which contacts the dealer. The dealer's complaint-handling policy requires escalation of any complaint alleging unauthorized trading to compliance within 5 business days and requires reporting of certain complaints to CIRO. The branch manager says the matter was 'resolved at the branch level.'
1. Identify the control failures and the regulatory exposure created by the branch's handling.
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The failures are layered. First, the complaint alleges unauthorized trading - a category the policy explicitly requires to be escalated to compliance within 5 business days. The branch manager either did not know the policy or chose not to apply it; either way the control failed. Second, the branch manager both investigated and adjudicated a complaint against a rep in their own reporting line, which is a conflict of interest. Third, the conclusion ('probably authorized verbally') is not a finding; it is speculation, and it was reached without documented evidence such as call recordings or signed trade confirmations. Fourth, the rep remained on the account during and after the investigation, creating a risk of further harm and of interference.
The regulatory exposure is significant: failure to escalate, failure to report where required, inadequate investigation, and potentially misleading the client in the closing letter. The dealer also now faces a credibility problem with the regulator because the internal record will show the complaint was known and not escalated. The CCO should treat the six-month gap as an aggravating factor, not a mitigating one.
2. What should the CCO do now that the regulator has made contact, and what should change in the complaint process?
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Now: (1) Preserve everything - the complaint, branch file, register entry, closing letter, call recordings, trade records, and the rep's notes. (2) Conduct a fresh, independent investigation by compliance, not the branch, with a documented scope and timeline. (3) Cooperate fully and promptly with the regulator; do not characterize the branch decision as 'resolution' in any communication. (4) Assess whether the client suffered a loss and whether remediation is owed, independent of the regulatory outcome. (5) Consider whether the rep's conduct or the branch manager's handling requires a reportable event or internal discipline. (6) Determine whether other clients of the same rep show similar patterns.
Process changes: centralize complaint intake so compliance sees every complaint on receipt, not on escalation; make escalation automatic by complaint category rather than discretionary; separate investigation from adjudication; require evidence-based findings with a documented standard; add a register review by compliance monthly with sampling; and train branch managers on what 'unauthorized trading' means and why it cannot be resolved locally. The CCO should also test whether the register contains other complaints that were closed without escalation.