At an Aug. 17 settlement hearing between the Mutual Fund Dealers Association of Canada (MFDA) and Calgary-based Portfolio Strategies Corporation, the MFDA fined Portfolio Strategies $100,000 plus costs totaling $10,000.
During compliance examinations held in 2016 and 2018 the MFDA says it identified deficiencies that were previously identified in 2012 and 2014 examinations. June 20, 2017 Portfolio Strategies terminated its chief compliance officer and its vice president of operations. The MFDA adds that since the company’s new chief compliance officer was hired, she has worked cooperatively with the MFDA to address the regulator’s concerns.
According to the settlement agreement, Portfolio Strategies admits that, between 2012 and 2018, it did not adequately supervise and did not establish, implement or maintain adequate supervisory policies and procedures regarding trade suitability and consistency with Know-Your-Client (KYC) information. It also allowed concentration in sector mutual funds and exempt market securities, failed to maintain a branch review program and did not maintain evidence of any nominee name reconciliations that were completed over 16 months between 2015 and 2016. “Some of the compliance deficiencies are repeat deficiencies,” the MFDA writes.
“By failing to adequately query approved persons who submitted trade orders that would significantly concentrate a client’s holdings in a particular mutual fund or exempt market security, supervisory staff of the respondent did not adequately ensure that such trade orders were suitable,” the settlement agreement adds. (More than one advisor identified in the settlement agreement had a high percentage of client accounts – 98 per cent of assets under administration in one case – that were heavily concentrated in precious metals and sector mutual funds.)
Portfolio Strategies is a mutual fund dealer and exempt market dealer operating 11 branches and 188 sub-branches in the provinces of Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Quebec and the Northwest Territories. It has been a member of the MFDA since February 2002.
