Toronto-based Quadrus Investment Services Ltd. has settled allegations with the Mutual Fund Dealers Association of Canada (MFDA) that it failed to supervise a representative and failed to report possible rule violations by the rep to the MFDA.
The mutual fund dealer agreed to pay a $75,000 fine, $20,000 in costs and to ensure that it complies with certain rules. An MFDA hearing panel approved the proposed settlement between the firm and the self-regulatory organization's staff following a hearing on Jan. 20.
According to the hearing panel's reasons in the case, Quadrus admitted to failing to supervise a rep adequately between March 2009 and July 2015 in order to prevent discretionary trading, to engage in personal financial dealings with clients and to use pre-signed account forms. The firm also failed to report possible violations by the rep, who worked in its Thunder Bay, Ont.-branch, that were uncovered by its compliance team.
"Failure to provide adequate supervision … is a serious matter," the MFDA's hearing panel said in its reasons. "Supervision is at the heart of effective securities regulation. Similarly, failure to report regulatory misconduct is serious because the regulator, the MFDA, cannot adequately supervise the conduct of the [dealer]."
In accepting the settlement, the hearing panel ruled that the proposed penalty was "reasonable and proportionate" and that it provides a deterrent to others in the investment industry. The hearing panel notes that there was no evidence of client harm in the case and no complaints from the clients of the rep in question.
In addition, Quadrus has since bolstered its procedures for overseeing reps. The firm also accepted responsibility for its misconduct and co-operated with the MFDA's investigation, the hearing panel notes.
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