Professional Investment Services (Canada) Inc. has paid a fine of $50,000 to the Mutual Fund Dealers Association of Canada for failing to resolve a number of compliance deficiencies dating back five years.

On Friday, the MFDA announced that a hearing panel had accepted a settlement agreement with PIS, under which the company must pay $50,000, plus proceeding costs of $25,000, and must retain an independent monitor at its expense to resolve all existing compliance deficiencies and others identified by the monitor.

The case dates back to August 2004, when a compliance examination of Generation — later renamed PIS Canada — identified deficiencies in a number of the firm’s policies, procedures and practices. In particular, the MFDA found faults in the firm’s branch review program, account supervision, approval of new accounts, amendments to Know-Your-Client information, accuracy of KYC information and KYC and suitability information.

A follow-up examination of Generation in 2006 found that the deficiencies had not been resolved. In early 2007, the firm agreed to develop and implement a plan to resolve the deficiencies and retain an independent consultant to monitor the process and report its findings to the MFDA.

In early 2008, PricewaterhouseCoopers — the consultant retained by PIS — reported that the firm had made significant improvements in its compliance structure and processes, but deficiencies remained unresolved.

PIS then took additional steps to resolve the problems, by hiring consultant Ernst & Young to help it develop a revised plan. But in January 2009, another MFDA examination found that the deficiencies had still not been resolved.

According to the most recent examination, some of the deficiencies that remain include PIS’ failure to audit the activity of branch managers, a lack of procedures in place to reconcile the accuracy of KYC information between the client file and Univeris, incomplete KYC information on file for certain accounts, and a lack of proper approval of new accounts.

The penalties against PIS come just over a week after news that mutual fund dealer Global Maxfin Investments Inc. has signed a definitive agreement to acquire PIS. The acquisition is expected to finalize in the fourth quarter.

IE