MFDA fines firm $100K for supervisory failures

By Staff | August 18, 2020 | Last updated on August 18, 2020
2 min read
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The Mutual Fund Dealers Association of Canada (MFDA) has fined a firm $100,000 for inadequate supervision identified during the regulator’s sales and financial compliance examinations.

In a settlement agreement dated July 21, the MFDA said Calgary-based Portfolio Strategies Corporation failed to conduct and maintain evidence of trade and account supervision, branch reviews and reconciliations of its securities held for clients in nominee name.

The compliance deficiencies were identified between 2012 and 2018, with some of them resulting in part from inadequate policies and procedures, the agreement said. Further, some were repeats.

Among the deficiencies was a failure to assess whether client purchases of funds with deferred sales charges (DSCs) were suitable given the client’s age and time horizon. The firm implemented revised policies and procedures for the suitability of DSC funds on Jan. 9, 2017, the agreement said.

Another supervisory failure involved accounts heavily concentrated in sector mutual funds or exempt market securities. In one such instance, the MFDA found that an approved person had 98% of their assets under administration invested in precious metals mutual funds. (The firm has since terminated the approved person’s registration.)

During the period in which the supervisory failures occurred, the firm’s chief compliance officer (CCO) was someone with about 20 years’ industry experience, including senior positions with a provincial securities regulator, the agreement said.

In June 2017, the firm “terminated” the CCO, it said, as well as the vice-president of operations. The new CCO hired at that time “worked co-operatively” with the MFDA to address the compliance deficiencies, the agreement said.

The firm also co-operated with the MFDA’s investigation, it said, and no evidence of client harm resulted from the compliance failures. In July 2018, the firm implemented a revised version of its policies and procedures to address the deficiencies.

In addition to the $100,000 fine, Portfolio Strategies Corporation must pay costs of $10,000.

For full details, read the settlement agreement. staff


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