OSC hands out $800,000 penalty to 1832 for sales practices

The Ontario Securities Commission has ordered 1832 Asset Management to pay an administrative penalty of $800,000 for failing to comply with rules in its mutual fund sales.

The Scotiabank-owned asset manager was also ordered to pay $150,000 in investigation costs.

Investment fund managers are prohibited from making a payment of money or providing a non-monetary benefit to a participating dealer or dealing representatives in connection with the distribution of securities.

In various cases between November 2012 and October 2017, 1832 “failed to meet the minimum standards of conduct expected of industry participants in relation to certain of its sales practices” for its Dynamic Funds, the OSC said in its settlement agreement.

The firm “did not have systems of controls and supervision over its sales practices that were sufficient to provide reasonable assurances that it was complying with its obligations.”

The firm also didn’t maintain “adequate books, records and other documents” to demonstrate its compliance, the agreement said.

Last week, the OSC ordered Mackenzie Financial Corporation to pay a $900,000 penalty for failing to comply with mutual funds sales practices.

Read: Details on Mackenzie Financial penalty for improper sales practices

The settlement agreement said 1832’s “excessive spending on promotional activities” included Montreal Canadiens, Toronto Maple Leafs and Toronto Blue Jays games; Rihanna, Fleetwood Mac and Justin Bieber concerts; Bose music systems and bottles of Dom Pérignon champagne.

In 2015, 39 dealer representatives (DRs) were given Vancouver Canucks tickets that cost between $740 and $863 each, while others were given Stevie Wonder ($749) and Adele ($1,169) tickets the same year. Three DRs had golf green fees of $625 apiece covered, the agreement said.

Glen Gowland, Scotiabank’s senior vice-president and head of asset management, said the firm started to make changes to its internal sales practices last year.

“We take our regulatory responsibilities very seriously and will continue to enhance 1832 Asset Management’s sales practices relating to Dynamic Funds,” he said in an emailed statement. “As this is an important matter for our industry, we will continue to work closely with regulators and others to ensure that, as manager of the Dynamic Funds, we meet all requirements with third-party dealers and dealer representatives.

Read the full settlement agreement here.

Staff

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