High angle view of mallet eyeglasses legal book in courtroom

Fund management firm 1832 Asset Management L.P. has agreed to pay slightly less than $1 million to settle allegations that it violated the mutual fund sales practices rule with excessive spending on gifts for reps and on industry conferences.

Following a hearing today, the Ontario Securities Commission (OSC) approved a settlement agreement with the fund manager, which is owned by Bank of Nova Scotia. Under the agreement, the firm acknowledge that it violated securities rules by spending too much on gifts for reps, including tickets to concerts and sports events; iPads for conference attendees; and drinks, food and hiring celebrity speakers Magic Johnson and Steve Wozniak at conferences.

As a result, according to the settlement, the firm failed to comply with the requirements of the sales rule and “failed to meet the minimum standards of conduct expected of industry participants in relation to certain of its sales practices.” The settlement also states that the firm did not have adequate controls and supervision over sales practices.

In settling the case, 1832 Asset Management agreed to pay an administrative penalty of $800,000 and costs of $150,000. It also agreed to be reprimanded, and to submit to a review of its practices and procedures.

According to the settlement, the firm has already taken remedial action to address its non-compliance with the sales rule, including rolling out a “comprehensive action plan” to its staff training and applying internal controls to ensure compliance with the rule. It also notes that the firm cooperated with the OSC’s investigation.

Today’s settlement is the second case this month involving violations of the sales rule, which securities regulators adopted “in order to discourage sales practices and compensation arrangements that could be perceived as inducing [dealers and their reps] to sell mutual fund securities on the basis of incentives they were receiving rather than on the basis of what was suitable for and in the best interests of their clients,” the settlement states.

In early April, the OSC settled a similar case against Mackenzie Financial Corp. which also focused on violations of the sales rule, including excessive promotional spending on reps.