Scotia Securities Inc. has been sanctioned in a settlement with the Canadian Investment Regulatory Organization (CIRO) after the firm discovered that investors’ complaints were being improperly entered into the complaint-handling mechanism of its parent bank, rather than the fund dealer’s system.
A hearing panel approved a proposed settlement with Scotia Securities, which saw the firm agree to a fine of $275,000 and to pay $10,000 in costs, for compliance failures that meant it failed to adhere to the complaint-handling standards set by CIRO.
According to the settlement, in 2024, during a review of the complaint-handling system that was adopted by the bank in 2022, Scotia discovered that certain complaints involving the conduct of Scotia Securities reps had been mistakenly recorded as banking complaints.
As a result, the dealer wasn’t aware of the complaints, those complaints weren’t reported to CIRO and they weren’t addressed under the standards set by the self-regulatory organization.
The dealer reported the issue to the regulator in 2024, and a review by the firm determined that there were 371 complaints that were improperly directed into the bank’s systems, rather than to the fund dealer. They included several instances of alleged misconduct, ranging from complaints about suitability to discretionary trading and allegations of misrepresentation, among other issues.
The dealer then used external counsel to address those complaints, resulting in 105 clients receiving a total of $58,780 in compensation. Another 10 clients who were offered $15,395 in compensation haven’t accepted those offers for one reason or another.
Additionally, the dealer reassessed 128 complaints in instances where it found that it hadn’t adhered to its own policy of contacting clients in connection with certain types of complaints — such as complaints involving allegations of serious misconduct — to determine whether those complaints were adequately remediated. That exercise resulted in it paying $70,613 in compensation to 10 clients, and offering two other clients a total of $4,500.
Since these issues were detected, the dealer has beefed up its controls to ensure that the complaint-handling system is working as required, the bank has implemented changes to its systems to prevent complaints about the dealer or its reps from being entered into the bank’s systems, and complaints are now automatically routed to the correct location, the settlement said.