After discovering discrepancies in client account fees, Scotia Capital Inc. reported the problem to regulators and has now settled an enforcement case on the issue.
A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) accepted a settlement with Scotia Capital that will see the firm pay a $140,000 fine and $5,000 in costs, after admitting that it violated the self-regulatory organization’s rules that require firms to have adequate controls to oversee client fee arrangements.
According to the settlement, the firm self-reported the violation after it was discovered during an internal audit in 2017.
An internal compliance review found that certain clients were being overcharged, and others were being undercharged, due to a discrepancy between the fees agreed upon by the client and the actual amounts charged by the firm.
An internal review found that the issue was typically caused by mistakes in the fee agreements or by data entry errors in transposing those agreements to the firm’s systems.
In response, the firm implemented a new fee calculator system that eliminated the need for the details of fee agreements to be manually entered into its systems.
It also launched a remediation plan to compensate negatively affected clients, totalling $32.35 million for almost 39,000 accounts.
The firm qualified for a 30% discount on its penalty by resolving the case early, voluntarily taking steps to fix the issue, compensating harmed clients, and cooperating with regulators.