Desjardins Financial Services Firm Inc. (DFSF) is paying $1 million to settle allegations that it violated mutual fund sales practices rules for operating a compensation scheme that favoured its proprietary funds.

The Autorité des marchés financiers (AMF) announced that Quebec’s Financial Markets Administrative Tribunal approved an agreement between the AMF and Desjardins that imposed a $1-million administrative penalty on Desjardins after an AMF investigation found that the firm had used an incentive structure that violated fund sales rules.

“The structure adopted by DFSF favoured the sale of Desjardins funds over non-Desjardins funds,” the regulator said in a release.

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According to the agreement, the firm’s pay structure was uncovered as part of an industry-wide review of fund compensation practices.

Following that review, the firm voluntarily made changes to its plan, and cooperated with the regulator’s subsequent investigation.

According to the AMF, the compensation plan was in effect from 2009 to 2016. Participation in the plan was initially optional for reps, but it was made mandatory in 2016.

The AMF also found that in the years when the compensation plan was optional, Desjardins failed to keep proper records on the bonuses paid to reps under the plan.

In doing so, the regulator said the firm “failed in its obligation to monitor compliance and manage potential conflicts of interest resulting from the incentive compensation.”