Details on Mackenzie Financial penalty for improper sales practices

Mackenzie Financial Corporation has been ordered by the OSC to pay an administrative penalty of $900,000 and costs of $150,000.

In a document detailing the reasons, dated April 6, 2018, the OSC says Mackenzie, which is registered as an investment fund manager, will also submit to and pay for “a review of its practices and procedures by an independent consultant.” The decision was approved on April 16.

Mackenzie was penalized because it “failed to comply with National Instrument 81-105 Mutual Funds Sales Practices and failed to meet the minimum standards of conduct expected of industry participants in relation to certain sales practices,” the OSC says.

The commission adds the firm “did not have systems of controls and supervision over its sales practices that were sufficient […].” Further, it “did not maintain adequate books, records and other documents to demonstrate Mackenzie’s compliance with National Instrument 81-105.”

In the reasons document, the OSC says Mackenzie admitted that it “provided excessive non-monetary benefits to dealing representatives” between May 2014 and October 2017. Examples include golf and dinner events “ranging in value from $839 to $1,149,” tickets to sporting events that cost between $608 and $981, and other items.

Between September 2015 and December 2017, the commission adds, the firm was found to have “provided non-monetary benefits to participating dealers (in the form of contributions to non-educational dealer events)” on 102 occasions.

Mackenzie Investments, reached for comment by Advisor.ca on Thursday, said via email, “We always strive to have our investors’ interests at the centre of everything we do. Throughout this process, Mackenzie Investments fully cooperated with the investigation. We take this matter seriously and continue to enhance our sales practice policies and controls.”

It added, “Sales practices is an important issue for the investment fund industry, and we are committed to working collaboratively with regulators and other industry participants to meet all legal requirements and regulatory expectations.”

At six conferences held between November 2014 and May 2015, the firm admitted to “providing excessive non-monetary benefits to dealing representatives through the gifting of iPad minis (valued at approximately $343) and the provision of certain dinners (in one case at a cost of nearly $500 per person),” says the OSC.

By providing this detail, the commission hopes to “provide guidance so that members of the industry might better understand the appropriate activity that is consistent with the sales practice limitations found in National Instrument 81-105.”

The OSC mentions its April 2017 settlement with Sentry Investments, which also involved improper sales practices. Sentry paid a penalty of $1.5 million and costs of $150,000. It also replaced CEO Sean Driscoll, who indicated in October 2016 that he wished to resign.

Read: Sentry to pay $1.5M for improper, lavish rep gifts

In Mackenzie’s case, the “seriousness of the conduct” is tied to “the length of time that the practices took place, the number of dealing representatives involved and the policy failings that permitted these practices,” says the OSC.

Prior to the settlement, Mackenzie took steps to improve its practices. That includes the implementation of new customer relationship management software to boost supervision, and the firm seeking “an independent consultant, to assess its controls,” the OSC says.

The firm also cooperated with the commission’s investigation.