A Mutual Fund Dealers Association of Canada (MFDA) hearing panel has fined TeamMax Investment Corp., $60,000 and assessed costs in the amount of $10,000 at a penalty hearing after it was determined that the firm failed to adequately supervise approved persons who were known for not accurately recording know your client (KYC) information.
The firm is also being sanctioned for failing to ensure its compliance with the terms of an earlier MFDA hearing panel order, for failing to implement a branch review program and for failing adequately detect and query uniformity in KYC information recorded by approved persons.
The decision follows an earlier decision wherein the firm’s former Ultimate Designated Person was sanctioned for failing to take steps to ensure the firm was in compliance with MFDA orders against it.
According to the MFDA’s notice of hearing, Antony Kin San Chau was the firm’s majority controlling shareholder, officer and sole director from September 2009 until January 2021. He was also registered as the chief compliance officer from January 2010 until April 2014, and again as interim chief compliance officer in 2018 and 2019.
Following a 2013 compliance examination, the MFDA issued an order in July 2014 requiring the firm to provide a historical leverage review of all non-registered leveraged accounts. It also prohibited the firm from opening any new non-registered leveraged accounts or making any new leveraged trade recommendations or processing any leveraged trades in any existing non-registered client accounts. It also prohibited Chau from being the firm’s chief compliance officer.
In 2017 the MFDA then entered into a settlement agreement related to the 2013 investigation and another examination conducted in 2015. The settlement agreement stated that the firm failed to respond to MFDA requests for information, failed to establish and maintain adequate policies and procedures to supervise leveraging, failed to conduct a historical leveraging review, failed to implement a supervisory structure or discharge MFDA supervisory obligations, failed to update policies and procedures or implement a branch review program, failed to adequately detect and query patterns in KYC information collected by approved persons and failed conduct sufficient supervision of approved persons’ outside business activities. At that time the 2017 settlement agreement was reached, the firm again agreed to pay a $60,000 fine and costs in the amount of $10,000.
In this most recent case, the firm is being sanctioned after its chief compliance officer reported her concerns about former approved persons in emails to Chau, in repeated conversations with him and in two reports to the firm’s board of directors. Chau reportedly insisted that he would speak with the approved persons but did not maintain any records that such conversations ever took place. Again, when the chief compliance officer flagged possible leveraged trades after several large dollar amount trades were made shortly after a line of credit or home equity loan had been approved, Chau stated that he wanted to speak with the approved persons personally, and advised the chief compliance officer to do nothing.
The firm also had 11 registered branch and sub-branch locations but did not conduct any reviews in 2018 or 2019 and reviewed only one branch in 2017, this according to a further 2019 investigation conducted by the MFDA. “This deficiency was a repeat deficiency,” they state.
