The Investment Industry Regulatory Organization of Canada (IIROC) has accepted a settlement agreement with National Bank Financial Inc., wherein the firm admits it failed to set and maintain adequate internal controls concerning certain transactions.
Specifically, the settlement agreement states that the firm had procedure and policy deficiencies which resulted in the erroneous opening of four options accounts in 2015, all with the same advisor.
The agreement further states that the firm’s policies provided guidance, but did not provide adequate controls. Those controls in place allowed the four client accounts to pursue a trading strategy which had, at times included high volume trading and exposure to high risk, both for the clients and the firm itself. It also resulted in higher commissions for the client’s investment advisor and resulted in margin deficiencies in one client’s account.
“The options trading resulted in losses in the aggregate amount of $272,325 for these four clients that were compensated by the respondent,” the settlement agreement states.
More, the firm is also being sanctioned for failing to detect the improper processing of trading error corrections in instances where there were no errors, in 18 client accounts between 2015 and 2018. “The investment advisor had not made any errors but instead sought to artificially enhance the performance of client accounts,” they write. The firm documented 101 purported error corrections over a three-year period which increased the value of the 18 accounts by $145,885.
In addition to the fine of $250,000, the firm also agreed to pay costs in the amount of $40,000.
