Questrade Wealth Management Inc. (QWM) of Toronto has agreed to make a voluntary payment of $2.9 million to settle to settle allegations that it failed to identify and respond to conflicts of interest when it sold eight of its ETFs to Toronto-based WisdomTree Asset Management Inc. in July 2017, the Ontario Securities Commission (OSC) announced Tuesday.
In the immediate aftermath of the sale, QWM purchased approximately $15 million in WisdomTree ETFs for client portfolios.
The OSC alleged that QWM didn’t properly investigate whether the transactions created a conflict of interest, and didn’t document its decision for a month, in violation of its own internal policies.
“Questrade acted contrary to the public interest by failing to take appropriate steps to determine whether a conflict of interest existed before investing client money. As a result, Questrade failed to meet the high standards of conduct expected of a registrant when identifying and responding to conflicts of interest,” the settlement agreement states.
In approving the settlement, an OSC hearing panel also reprimanded the investment fund manager and portfolio manager and ordered QWM to pay $100,000 in costs.
The agreement indicates that QWM has: hired an independent consultant to conduct a suitability review for clients in its affected portfolios; beefed up its compliance systems and internal controls regarding conflicts of interest; and co-operated with the OSC’s investigation.