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SFC On-Site Inspections
What is an SFC on-site inspection?
An SFC on-site inspection is a regulatory review of an SFC licensed corporation's business and compliance systems.
An inspection can be an overall health check focused on an individual licensed firm.
... or it can be a review based on particular concerns of the SFC of the individual licensed firm
... or it can be a review which forms part of a large review of a number of licensed firms focusing on a particular theme.
What factors affect the odds of an SFC inspection?
Resourcing
SFC resource constraints appear to be reducing the relative likelihood of an inspection
Age
More recently licensed firms may see a greater chance of an inspection
Time
Most licensed firms will see an inspection at least once every 7 years
Profile
Licensed firms which fit SFC criteria for higher risk may see an earlier inspection
Recent odds of an SFC inspection
2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 | |
Number of Inspections | 301 | 304 | 317 | 304 | 262 |
Number of LCs | 2702 | 2960 | 3109 | 3159 | 3231 |
Percentage of LCs Being Inspected | 11.14% | 10.27% | 10.20% | 9.62% | 8.11% |
Recent outcomes of SFC inspections
2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 | |
Breaches per Audit | 4.9 | 4.07 | 4.7 | 4.44 | 5.4 |
Types of Breaches identified in Recent Inspections
2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 | |
Internal Control Weaknesses as % of Inspections | 36.00% | 36.00% | 30.00% | 38.00% | 30.00% |
Non-Compliance with AML Guidelines as % of Inspections | 12.00% | 16.00% | 22.00% | 15.00% | 21.00% |
Breach of Code of Conduct as % of Inspections | 22.00% | 22.00% | 18.00% | 19.00% | 19.00% |
Total | 70.00% | 74.00% | 70.00% | 72.00% | 70.00% |
Defensive steps given common breaches identified
Most commonly identified breaches are non-statutory in nature. Typically, non-statutory requirements are principles based. The specific standard is unstated and the SFC has wide latitude to interpret and re-interpret the standard over time.
Consequently, SFC licensed corporations must regularly review and update internal policie to meet evolving standards to comply with non-statutory requirements.
How can SFC licensed firms prepare for an SFC inspection?
Review compliance policies to ensure they are complete and reflect current regulatory expectations
Conduct period walk throughs and sample checks to ensure current operating practices are consistent with compliance policies and such policies are responsive to current operations
