In a settlement with regulators, investment dealer, National Bank Financial Inc. (NBF), agreed to pay $1 million to resolve allegations that it failed to properly supervise one of its reps, who was previously disciplined for alleged misconduct.
A hearing panel of the Canadian Investment Regulatory Organization (CIRO) approved a proposed settlement with NBF over its supervision of Matthew Ewing — a rep who joined the firm from RBC Dominion Securities in March 2021 and was terminated in November 2022. The firm admitted that, between April 2021 and August 2022, it didn’t adequately supervise his note-taking and suitability assessments.
Under the settlement, the firm agreed to a $1 million fine and to pay $50,000 in costs.
In January, Ewing was hit with a 10-year ban and ordered to pay $125,000 in penalties and costs, after it found that he breached the self-regulatory organization’s rules in his conduct with clients — specifically, that he engaged in personal financial dealings with clients.
However, the panel dismissed allegations that Ewing engaged in unapproved discretionary trading, and falsified portfolio documents — finding that, in that case, the SRO’s staff failed to prove those allegations.
The settlement with NBF focused on the firm’s supervision of Ewing’s trading activity, which included a high volume of trading that, it said, should have raised red flags at the dealer.
While the firm did question his trading activity and record keeping, the settlement said that, “NBF admitted that it did not sufficiently question the transactions and did not seek further explanations for missing notes relating to the transactions.”
Instead, “NBF relied on Ewing’s explanations, which were subsequently discovered to be inaccurate or factually incorrect,” the settlement noted.
It also said that the firm failed to ensure that the voluminous trading was being carried out under the direction of the clients, or to question the suitability of concentrated positions in risky tech stocks for certain clients.
Additionally, many of his clients were using margin, and they faced numerous margin calls in late 2021. In light of the hefty use of margin, “NBF did not take any appropriate action to analyze the account profiles or client holdings,” the settlement said.
In addition to the regulatory sanctions, the settlement noted that NBF has compensated 28 of the clients affected by Ewing’s conduct, and that it has since beefed up its supervisory systems.