A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has fined a firm $350,000 for supervision failures, the regulator said in a release on Wednesday.
IA Private Wealth Inc. (IAPW) admitted that it failed to establish and maintain a system to supervise its employees’ activities — largely those of Donald McFarlane, a former director with the firm, according to a settlement agreement.
McFarlane joined the firm — previously named Industrial Alliance Securities Inc. — as a result of a 2013 acquisition. His unsupervised activities included unsuitable investment recommendations to clients, high concentration and trading volumes in small issuers, and the improper use of margin in client accounts, the settlement agreement said.
While supervisors routinely monitored McFarlane’s activities and raised concerns, McFarlane “consistently assured IAPW by updating [know-your-client forms] and advising that he had discussed the strategies with his clients,” the settlement agreement said.
After McFarlane died in 2019, multiple clients complained to the firm.
“All of the complainants had strong personal relationships with McFarlane going back decades that led them to maintain investment accounts serviced by him for many years,” the settlement agreement said.
Once notified of the complaints, IAPW immediately reported the misconduct to IIROC and conducted a “broad and thorough” internal investigation, the document said.
“IAPW has since entered into settlement agreements with a number of the complainants, implemented revised policies and procedures, and implemented a new compliance structure in an effort to prevent similar misconduct in the future.”
This case was resolved by early resolution offer, with enforcement staff agreeing to a 30% reduction of the sanctions that IIROC would otherwise have sought, based on IAPW’s cooperation, the remedial measures it implemented and the compensation it offered to clients.
In addition to the $350,000 fine, IAPW agreed to pay costs of $25,000.