The Nova Scotia Securities Commission (NSSC) has approved two settlement agreements, with sanctions, with mutual fund dealer Quadrus Investment Services Ltd. and one of the firm’s mutual fund salesmen, Grant Rust.

The NSSC said Quadrus violated Nova Scotia securities laws by failing to provide close supervision to Rust, and failing to establish supervisory procedures that conformed with prudent business practice.

Rust violated securities laws by failing to deal fairly, honestly and in good faith with his clients. He also failed to establish prudent business procedures for dealing with his clients, the NSSC said.

In February 2004, terms and conditions were placed on Rust by the NSSC that required he be kept under close supervision by Quadrus, which agreed to provide that close supervision to monitor his activities. The company failed to meet those commitments, the NSSC said.

In February 2007, Rust violated the terms and conditions by providing inconsistent information on loan applications. He also advised clients to sign blank documents and to purchase and redeem funds, resulting in clients paying excessive deferred sales charges.

The NSSC said Quadrus and Rust both accepted responsibility for their conduct and were co-operative with commission staff.

Since the violation, Quadrus has hired new supervisory personnel, changed its supervisory structure and enhanced its processes for supervision of representatives and the use of leverage.

“Effective supervision is the first line of defence in investor protection. The lesson learned in this proceeding is that firms are key players in investor protection and they must be diligent in providing effective supervision,” said Heidi Schedler, enforcement counsel for the NSSC.

The commission approved the settlements and ordered Quadrus to pay a penalty of $40,000, and $1,000 in costs. It ordered Rust to pay a $10,000 penalty, and $1,000 in costs.