The Mutual Fund Dealers Association of Canada is warning its members of the Ontario Securities Commission’s temporary order against Portus Alternative Asset Management Inc., and demanding that its members stop referring clients to the firm.

Under the OSC order, effective Feb. 2, Portus is prohibited from opening any new client accounts, or accepting any new funds or assets for investment in respect of any existing client accounts. The OSC temporary order is based in part on possible contraventions of securities rules, although nothing has been proven. The MFDA also notes that “other securities commissions have issued similar orders or have raised similar concerns”.

Staff from the OSC enforcement and compliance branches have been at Portus’s office for the past several days, reviewing the firm’s records and books as part of the probe.

Portus manages $800-million on behalf of about 26,000 clients across Canada. Effective immediately, the firm cannot open new accounts or accept additional funds from existing clients under terms imposed by regulators in Ontario, Alberta and New Brunswick.

The MFDA says it is aware that a number of MFDA members have entered into referral arrangements with Portus regarding managed accounts involving BancNote Trust Series investments. It advises dealers to contact the securities commissions directly for more information. “MFDA members in the affected jurisdictions must immediately cease referring clients to Portus during the period covered by the temporary order and any subsequent orders,” the MFDA says.

The regulator also directs its members to “take appropriate steps” to determine if any of their reps have entered into referral arrangements directly with Portus and if so, cease such activity immediately. It reminds dealers and reps that securities-related referrals cannot be entered into by reps either directly or indirectly through another entity, such as an insurance agency or a personal service corporation, these sorts of referrals can only be made through an MFDA member.

“Any cases of non-compliance with the requirements identified in this notice will be referred to enforcement,” it warns.