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MFDA Hearing Panel accepts settlement agreement with Scotia Securities Inc.


TORONTO, Dec. 21, 2022 /CNW/ – A settlement hearing in the matter of Scotia Securities Inc. (the “Respondent”) was held electronically by videoconference today in Toronto, Ontario before a three-member Hearing Panel of the Central Regional Council of the Mutual Fund Dealers Association of Canada (“MFDA”).

The Hearing Panel accepted the settlement agreement dated December 19, 2022 (the “Settlement Agreement”), between Staff of the MFDA and the Respondent as a consequence of which the following sanctions were imposed on the Respondent:

  • a fine in the amount of $1,000,000 with;
  • costs in the amount of $75,000; and
  • shall in the future comply with MFDA Rules 2.5.1, 2.2.1, 2.1.1 and MFDA Policy No. 2.

In addition, the Respondent is paying $10.8 million in remediation to clients.

In the Settlement Agreement, the Respondent admitted that:

a) 

prior to April 2020, it failed to implement adequate policies and procedures and an adequate system of controls and supervision to ensure that its Approved Persons processed certain transactions as switches, rather than as redemptions and purchases, which resulted in the Approved Persons receiving increased performance credits which counted toward their sales targets, contrary to MFDA Rules 2.5.1 and 2.1.1 and MFDA Policy No. 2;

b) 

prior to January 2021, it failed to implement adequate policies and procedures and an adequate system of controls and supervision to prevent its Approved Persons from establishing and subsequently cancelling pre-authorized contribution plans without adequate evidence of client authorization, which resulted in some of the Approved Persons receiving increased performance credits which counted toward their sales targets, contrary to MFDA Rules 2.5.1 and 2.1.1 and MFDA Policy No. 2;

c) 

prior to July 2021, it failed to implement adequate policies and procedures and an adequate system of controls and supervision to prevent its Approved Persons from manually adjusting their sales results, which resulted in some of the Approved Persons receiving increased performance credits which counted toward their sales targets, contrary to MFDA Rules 2.5.1 and 2.1.1;

d) 

between March 2020 and July 2020, at the onset of the COVID-19 pandemic, it failed to implement adequate policies and procedures and an adequate system of controls and supervision to ensure that it provided redemption cheques to clients in a timely manner, contrary to MFDA Rules 2.5.1 and 2.1.1;

e) 

prior to April 13, 2021, it failed to implement adequate policies and procedures and an adequate system of controls and supervision to ensure that clients did not purchase certain mutual funds in non-registered accounts which, according to the funds’ simplified prospectuses and fund facts documents, were not suitable to be held in such accounts, contrary to MFDA Rules 2.2.1, 2.5.1 and 2.1.1; and

f) 

between November 24, 2021 and February 9, 2022, it failed to ensure that some client account transfer requests that were sent to one of its fax servers were processed in a timely manner, contrary to MFDA Rules 2.5.1 and 2.1.1

A copy of the Settlement Agreement is available on the MFDA website at www.mfda.ca.

The MFDA is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its Members and their approximately 76,695 Approved Persons with a mandate to protect investors and the public interest. For more information about the MFDA’s complaint and enforcement processes, as well as links to ‘Check an Advisor’ and other Investor Tools, visit the For Investors page on the MFDA website.

SOURCE Mutual Fund Dealers Association of Canada

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