PEAK sanctioned by MFDA for failing to investigate misconduct

The Mutual Fund Dealers Association of Canada (MFDA) accepted a settlement agreement with PEAK Investment Services Inc., August 5, wherein PEAK admits it did not appropriately investigate or report approved persons accused of misconduct.

The firm further agrees that it will pay the MFDA a fine totaling $75,000 plus costs in the amount of $15,000.

In the settlement agreement, PEAK admits it failed, prior to December 2016, to ensure that on-site branch and sub-branch reviews occurred at each of its locations. The firm also agrees it failed to make mandatory reports to the MFDA on the Member Event Tracking System (METS) on a timely basis, or conduct adequate or timely investigations after discovering potential misconduct by approved persons.

“Many of the approved persons whose conduct ought to have triggered Reasonable Supervisory Investigations (RSIs), subsequently were named as respondents to disciplinary proceedings commenced by (MFDA) staff,” the MFDA wrote, before taking the unusual step of naming a list of approved persons from PEAK who have disciplinary records with the regulator.

When concerns were raised about the identified respondents, the MFDA says PEAK, in some cases did not issue written directions, did not take steps to heighten supervision, did not take steps to explain to the accused advisors why their conduct was inconsistent with regulatory requirements, in some cases did not attend the approved persons’ business in a timely fashion to review files, did not send timely letters to clients about the approved person’s conduct asking them to review their accounts, and in some cases did not contact complainants directly to get their version of relevant events. (The identified representatives are accused of unauthorized trading, personal financial dealings, engagement in undisclosed outside activities, and misappropriation of client funds.)

Some of the firm’s compliance deficiencies had already come to light in earlier 2014 and 2016 compliance examinations done by MFDA staff. During the MFDA’s 2016 investigation, PEAK had 151 approved persons working in 102 business locations. In the three years leading up to the 2016 investigation, the firm failed to conduct on-site reviews in 35 locations where 55 approved persons conducted business. In circumstances where reviews were completed, the MFDA says PEAK did not document all deficiencies or adequately follow up on identified compliance deficiencies.

Registered as an MFDA member since March 2003, PEAK is registered as a mutual fund dealer in all 10 Canadian provinces and in the Yukon and Northwest Territories. In a separate May 2018 settlement agreement between PEAK and Quebec’s Autorité des marchés financiers (AMF), the firm agreed to pay an administrative penalty of $200,000 and costs of $20,000 after the firm and its chief compliance officer were subject to disciplinary action regarding PEAK’s internal controls and supervisory processes. In November 2018, the firm hired a new chief compliance officer in compliance with the conditions of its agreement with the AMF.

Since receiving the MFDA’s 2016 compliance report, the firm says it has spent over $1-million on external consultants and lawyers to help address compliance deficiencies.