Mutual fund dealer PEAK Investment Services Inc. has admitted to supervisory lapses in a settlement with regulators.
A hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) approved a settlement with the Montreal-based firm, which agreed to pay a $75,000 fine and $15,000 in costs to settle allegations that it violated MFDA rules.
In settling the allegations, PEAK admitted that it failed to conduct adequate supervisory investigations after discovering potential misconduct by reps; that it didn’t meet its mandatory reporting obligations to the MFDA’s Member Event Tracking System (METS) in several cases; and that it failed to ensure on-site branch reviews at each location.
Among other things, the settlement said that between 2013 and 2017, PEAK failed to carry out adequate supervisory investigations of 10 reps after learning about possible misconduct, including allegations of unauthorized trading, misappropriating client funds, engaging in personal financial dealings with clients and carrying on undisclosed outside business.
Many of these reps subsequently faced disciplinary proceedings from the MFDA.
The settlement indicated that “after discovering potential misconduct,” PEAK didn’t adequately investigate to determine “the full scope of possible misconduct and to reduce the risk of potential continuing harm to clients.”
PEAK has already been sanctioned over weaknesses in its internal controls and supervisory processes by the Autorité des marchés financiers (AMF).
In 2018, the firm and its former chief compliance officer settled with the AMF. Under that settlement, PEAK paid $200,000 and $20,000 in costs, the MFDA settlement said.
The MFDA also noted that PEAK has since spent over $1 million on external consultants and lawyers to help beef up its compliance policies and procedures, update its governance structure and enhance staff training to address its compliance deficiencies.
PEAK also hired a new CCO and established a compliance committee of senior executives to enhance its compliance.