The Ontario Securities Commission (OSC) has ordered a three-year ban and a $25,000 penalty against the former chief compliance officer (CCO) of suspended fund manager Pro-Financial Asset Management Inc. (PFAM).

John Farrell admitted that he breached his obligations as CCO of as Oakville, Ont.-based PFAM, and that his conduct was contrary to the public interest, in a settlement agreement approved on Monday by on the OSC.

Under the agreement: Farrell is reprimanded; prohibited from becoming a director or officer of any issuer, registrant, or investment fund manager for three years; banned from registration for three years; and ordered to pay an administrative penalty of $25,000.

The settlement stems from allegations of internal control failures at PFAM, including: a discrepancy in the record-keeping for a series of principal protected notes (PPNs) administered by the firm; improperly calculating some management expense ratios (MERs); and operating with a capital deficiency.

According to the settlement, Farrell, who has since retired from the industry, first uncovered a discrepancy between the records of the PPNs’ trustee and its record-keeper in December 2012. By April 2013, that discrepancy had been calculated at $1.2 million.

The OSC investigation suggests that the discrepancy occurred, in part, because PFAM failed to properly account for money in the notes’ trust account, and that it also failed to communicate, and investigate, discrepancies when they arose.

The firm commingled money that was received for the different PPN series, and money related to other PFAM products, in the trust account, the OSC reports. And it failed to perform reconciliations of the trust account to determine how much of the balance of the account related to each PPN series. Farrell should have discovered and resolved these discrepancies as they cropped up, the OSC notes.

“His failure to take steps to ensure that he was aware of any PPN discrepancies was a breach of his obligations as PFAM’s CCO to monitor and assess compliance by PFAM with securities legislation,” the settlement agreement states.

In addition, Farrell breached his obligations as CCO by not ensuring that its published MERs were correct, the agreement adds, and, for certifying that PFAM was in compliance with its capital requirements when it was not.

Farrell co-operated with the OSC’s investigation, the agreement notes, and he had a long career in the industry with no prior regulatory troubles. He is retired and does not intend to resume his career, it adds.

In settling the OSC’s allegations, Farrell admitted that he breached his obligations as PFAM’s CCO.

The next hearing into the remaining allegations in the case is scheduled for Sept. 15.