A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has approved a settlement with Windsor, Ont.-based Sterling Mutuals Inc. stemming from alleged deficiencies in the firm’s complaint-handling processes.
The settlement requires Sterling to pay a $75,000 fine, $34,000 in client compensation and $20,000 in costs in connection with allegations that it failed to properly investigate a client complaint and failed to properly supervise a couple of representatives to ensure suitability.
The settlement also covers complaint-handling deficiencies that occurred at another firm, Armstrong & Quaile Associates Inc. (A&Q), before Sterling acquired A&Q in 2015.
In addition to the monetary sanctions, Sterling also agreed to ensure that its policies and procedures for dealing with complaints are in compliance with MFDA rules; that events are properly reported to the MFDA’s Member Event Tracking System (METS); that complaints are handled by qualified, impartial staff; and that reps facing complaints aren’t contacting complainants about the substance of their complaint, among other things.
According to the settlement, the firm admitted to its own complaint-handling deficiencies in one case; and that A&Q, prior to its amalgamation with Sterling, failed to properly investigate a couple of complaints and failed to report a complaint to the MFDA.
“Prompt and fair complaint handling is a baseline expectation of members in the industry that is essential for effective supervision and fairness to clients,” the hearing panel says in its decision approving the settlement. “If complaint handling is not conducted promptly, the potential for effective investigation may be undermined and a complainant may be unfairly deprived of a timely resolution to the complaint. If a complaint is not handled fairly, the process fails investors and is inconsistent with the public interest.”
The decision also notes that Sterling has accepted responsibility for its conduct, regrets the misconduct, co-operated with the MFDA’s investigation and agreed to pay substantial compensation to clients, which also helped speed up the disciplinary proceeding.
“The settlement agreement is the result of significant negotiation and conveys clearly that the respondent’s misconduct constituted serious regulatory contraventions that have resulted in significant penalties,” the hearing panel’s decision states.
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