Compliance Review Report: Transactional Records

Client Files and Testing of Transaction Records

In this report, we summarize the findings from an inspection team reviewing the compliance of certain companies with regulations related to maintaining and providing transactional records.

Introduction of Client and End-User Files

• 39 client files were introduced
• 38 end-user client files were also introduced
• For 49 company files:
  • 21 (54%) introduced companies received transactional records
  • 28 (74%) end-user companies received transactional records

Testing of Transaction Records

Our team tested the transaction records for 77 companies and found:

• 64% (49 out of 77) received transactional records
• 82% (63 out of 77) had a response from the person and address on record
• Only:
  • 24 (49%) showed and explained company transactions
  • 25 (51%) did not show and explain company transactions
• 26 (53%) enabled determination of financial position with reasonable accuracy

Verification of Person Holding Records and Physical Address

We verified the consistency of records for the person responsible for transaction records and physical address for:

End-User Companies

• 76% (29 out of 38) had consistent records
• Only 12 companies did not have consistent records

Introduced Client Files

• 87% (34 out of 39) had consistent records
• Only 5 companies did not have consistent records

Quality of Transaction Records

Our team reviewed the quality of transaction records uploaded by licensees and found:

• All 10 licensees reviewed uploaded responses to testing information requests within a reasonable timeframe (48 hours)
• Examples of transaction records included income statements, balance sheets, loan agreements, and business plans
• Only:
  • 24 out of 49 (49%) company files showed and explained company transactions
  • 26 out of 49 (53%) enabled determination of financial position with reasonable accuracy

Circumstances Surrounding Failure to Respond

We identified the following reasons for failure to respond or inadequate transaction records:

No Transactional Records Submitted

• 17 client files due to dormancy
• 5 companies without explanation or rationale
• One company did not submit any transaction records due to a COVID-19 outbreak

Inadequate Transaction Records

• 4 client files, focusing on corporate fees rather than business activities and transactions