Following a decision by the Mutual Fund Dealers Association (MFDA) earlier this year, wherein PEAK Financial Group Inc.’s MFDA subsidiary was fined for failing to investigate misconduct, another subsidiary, PEAK Securities Inc., has now been fined $130,000 by the Investment Industry Regulatory Organization of Canada (IIROC).

According to a settlement agreement between PEAK Securities and IIROC staff, the firm admits it failed to adequately supervise the activities of its personnel and failed to establish and maintain internal controls – which ultimately led to the firm overcharging nearly 500 clients who held fee-based accounts with the firm.

Several of the deficiencies had previously been brought to PEAK’s attention during examinations conducted by IIROC in 2015 and 2017. The findings of concern that IIROC says were significant and repetitive, included supervision lapses, a lack of supervision regarding employees’ outside accounts (for many employees this supervision was inadequate or non-existent), referral arrangements (deficiencies were observed concerning PEAK’s analysis of conflicts of interest), deficient internal inspections of its business locations, deficient supervision of fee-based accounts and monthly supervision of non-trading activities, supervision of social media (some employees had LinkedIn accounts without prior approval), and deficient continuing education controls.

Further, IIROC found that the company’s policies and procedures manual was incomplete and obsolete. For most of the trades examined by IIROC staff, there was no evidence of pre-trade disclosure of charges to clients. Notably, the settlement agreement also outlines how the company collected approximately $191,500 in excessive fees from clients holding fee-based accounts.

“Because of the controls in place, which proved inadequate in spotting securities that paid trailing commissions, securities containing embedded compensation were not excluded from the annual fee calculation and some clients therefore overpaid,” the settlement agreement states. “The respondent reported the overcharging problem to IIROC voluntarily and has since made diligent efforts to return this money to its current and former clients.”

In addition to the $130,000 fine, PEAK has also agreed to pay IIROC’s costs totaling $5,000.