An inspection is a preventive process to ensure compliance by financial sector participants within the legal and regulatory requirements in order to protect consumers of financial products and services.

The inspection process is conducted in co-operation with the individuals and entities being inspected to help them improve their professional practices. 

Individuals and firms that are registered with the AMF or that hold a licence issued by the AMF are subject to inspection. They are selected based on certain criteria and are inspected at different frequencies, depending on their degree of risk.

The AMF uses a risk-based approach, focusing on quantitative and qualitative criteria. Some examples of criteria that may be considered when selecting registrants for inspection are type of professional activity, financial position, situations of regulatory non-compliance, number and type of complaints, number of representatives, employees or branches, combination of registrations and evaluation of residual risk from the previous inspection.

No, the inspection is mandatory.

Inspectors may:

• enter any establishment at any reasonable time;
• meet with employees;
• request copies of books, registers, accounts, records and other documents in the manager’s office; and
• require any document relating to the registrant’s activities.

1. Scheduled on-site inspections

   This inspection is planned ahead of time, and the individual or entity receives advance notice of the inspection date and the names of the inspectors. The purpose of this type of inspection is to verify compliance with the obligations under the legislation and regulations governing the registrant’s area of practice. For example, reviews may focus on supervision, transactions or business conduct.

2. Unscheduled on-site inspections

   An inspection may be planned but not announced in advance, or may be announced on short notice. This type of inspection may take certain risk factors into consideration. For example, it could be a follow-up inspection, i.e., an inspection designed to validate whether the corrective measures recommended during the previous inspection have been implemented and whether they are effective.

3. Off-site inspections

   An off-site inspection may be carried out by mailing self-evaluation questionnaires, for example, or by requesting documents. This method is used when the AMF wishes to extend the scope of the inspection to several registrants, share expectations about best practices to be adopted, or validate an industry-specific situation. Registrants and licence holders are required to respond to the AMF, as this type of inspection is also used to verify compliance with the laws and regulations that the AMF administers.

4. Other types of inspections

   Other types of inspection may focus on targeting or reviewing a particular aspect of the practice, such as the management of separate accounts or close supervision. These inspections can be performed on site, via a questionnaire or by telephone.

An inspection generally begins with a courtesy call from the lead inspector. A notice stating the date and location of the inspection and the names of the inspectors is then sent to the responsible officer, or respondent, as applicable.

The AMF also gives the entity access to its secure File Transfer Service (FTS) site. For most inspections, the AMF asks the entity to submit documents prior to the inspectors’ arrival (list of sales, separate accounts, list of employees, etc.).

When the inspectors arrive on site, they will set up and familiarize themselves with the entity’s environment.

Usually, on the first day of the inspection, the inspectors will meet with the officer or respondent to explain the inspection steps.

Throughout the inspection process, the officer (or respondent) and employees are encouraged to ask questions.

General inspection steps:

• Introductory interview with the officer (or respondent) to explain the inspection process
• Visit of premises: inspection of files, workstations, computer hardware, and points of access
• Analysis of records, books and registers selected by the inspectors
• Interviews with representatives and employees
• Discussion points relating to professional activities
• Exit interview and summary of general findings

While working on site, inspectors are careful to keep to a minimum any activities that could disrupt the normal operations of the individual or entity being inspected. Although the inspectors carry out their activities independently, it is important that a person in authority be available during the inspection to answer any questions or requests.

After the inspection:

• Following the inspectors’ visit, an inspection report is sent to the individual or entity that was inspected. The report outlines the inspectors’ findings and any deficiencies to be corrected. The subsequent inspection events will vary depending on the nature of the findings and the extent of certain deficiencies. The inspected individual or entity may be asked to prepare an action plan and sign a written commitment to undertake the necessary corrective measures.

• A follow-up inspection may be planned to validate implementation of these measures.

In some instances, a case may be transferred to another AMF unit. For example, a case involving situations deemed serious could be referred to our litigation department for appropriate action. 

Throughout the inspection process, the entity will have access to the AMF’s resource persons and the inspectors responsible to carry out the inspection.

The AMF produces a report for every inspection. Each entity that is inspected receives a report describing the inspectors’ work, their findings and any corrective measures to be implemented.

Important

The inspection report remains the property of the AMF. It is strictly confidential and is sent for internal use only. Any communication of the report or its contents is prohibited without the written authorization from the AMF, unless it is required by law. Any use of the report or its contents for commercial, marketing or other purposes is strictly prohibited.

As a general rule, the inspection file will be kept open pending a response to the inspection report.  In its response, the entity must confirm that it will take the necessary steps within the timeline given to correct any deficiencies. It should be noted that the information and answers given may be verified during a subsequent inspection.

Any refusal to implement the corrective measures could result in special procedures. The AMF reserves the right to take any legal or administrative action it deems appropriate to ensure compliance with applicable laws and regulations.

AMF inspections are intended primarily to obtain reasonable assurance that the inspected individuals or entities comply with the laws and regulations governing their business practices.

Therefore, inspection teams work in tandem with AMF clients to ensure that their control environments are sufficiently robust to comply with the laws and regulations applicable to their professional activities.

The AMF works closely with the individual or entity being inspected to help them improve their practice, promote a compliance culture and make any necessary changes to correct the deficiencies observed during the inspection. This involves meticulously verifying, validating and analyzing business and control environments. Although the purpose of inspections is preventive, not punitive, the AMF will impose penalties in cases of serious violation.

AMF inspections are not intended to be repressive or dissuasive in nature; they are designed to create and develop a compliance culture and to prevent fraud and financial crime in Québec’s financial markets.

On the other hand, AMF investigation teams strive to identify, discover and disclose violations of the laws and regulations the AMF administers. Investigators must obtain evidence that an entity or individual—one that, more often than not, is not registered with the AMF—has committed an offence. The purpose of the investigation is to prevent and deter such offences.