Investment firm fined $1.1M for failing to supervise advisors

Investment firm fined $1.1M for failing to supervise advisors

Investment firm fined $1.1M for failing to supervise advisors

IIROC is sending a strong message to investment firms that it won’t stand for wishy-washy supervision of financial advisors.

Canaccord Corp. - the capital markets division of Canaccord Genuity Group Inc. - has been penalized $750,000, plus additional costs, for failing to properly supervise retail client account activity and for refusing to adopt procedures to adequately identify “accredited investors.”

A settlement agreement indicates that, between 2005 and 2009, Canaccord’s branch managers failed to supervise retail account activity, while head office supervisors turned a blind eye to unsuitable holdings and excessive trading. Other red flags pointing to manipulative and suspicious trading behaviour by clients were also ignored. The incidents occurred in Kelowna, Prince George and Vancouver, B.C., as well as in Montreal.

Additionally, from June 2009 to February 2011, Canaccord resisted IIROC’s charge that it failed to adhere to the Deal Member Firm’s responsibility when enacting purchases of securities in non-brokered private placements by its clients. According to IIROC, Dealer Member Firms must have procedures in place to “reasonably assure” that its clients qualify for exemptions, which allow them to purchase private placements.

At Canaccord’s Whitehorse branch, IIROC identified 71 out of 79 clients who did not meet the Accredited Investor definition with more than $1,000,000 in financial assets required to purchase private placement, but had done so anyway for a total value of about $800,000.

The firm has since admitted neglect and changed its procedures.

In addition to the $750,000 fine, Canaccord Corp. will fork out another $310,000 to pay back commissions and $50,000 in other costs.

 

1 Comments
  • manifesto2000 2016-06-28 6:29:22 AM
    It is interesting to note that Canaccord was notified in a detailed complaint from a Kelowna client in 2007 - and persisted in brushing off the client until the elderly investor had to go to court to obtain 2 judgements against Canaccord. The company paid out about $27,000 of the client's claim of $50,000 in damages for churning and making unauthorized trades and putting funds into high commission investments without the knowledge or consent of this customer.

    This client has requested that IIROC endorse the fact the the $51,000 paid out in legal and lawyer fees was brought on solely because of the negligence of Canaccord at all levels. The client seeks to have Canaccord pay this and to return the rest of the squandering of the client's out of pocket losses due entirely to bad faith practices.
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