Firm agrees to $2 million penalty for misleading clients

Company admits directing clients to own dealer despite not always offering the best rates and spreads

Firm agrees to $2 million penalty for misleading clients

Caldwell Investment Management (CIM) has agreed to a £1.8 million fine and to pay $250,000 costs for misleading clients and directing them to its own related dealer despite not always offering the best commission rates and bond spreads.

An Ontario Securities Commission panel approved the settlement because of the firm's failures to comply with its best execution obligation, which requires dealers and advisors to execute trades for clients on the most advantageous terms "reasonably available under the circumstances".

CIM has also agreed to terms and conditions being imposed on its registration, which included a requirement to pay for an independent consultant, approved by OSC staff, to review and test its new best execution procedures.

The investment management firm admitted that, over an almost four-year period from January 1, 2013, to November 15, 2016, it directed most of its clients through Caldwell Securities Ltd. (CSL), its own related investment dealer, when in many cases unaffiliated dealers offered better commission rates and bond spreads.

CIM also admitted that it had inadequate policies and procedures relating to best execution, made misleading statements in the Annual Information Forms for two of its mutual funds, and provided insufficient and inaccurate information to the Independent Review Committee for these two funds.

Jeff Kehoe, director of the enforcement branch at the OSC, said: “CIM’s failure to develop, document and enforce clear policies and procedures for best execution led to self-interest dictating how client orders were handled. These are serious lapses in oversight that will not be tolerated.”

The OSC thanked the Investment Industry Regulatory Organization of Canada (IIROC) for their help in the investigation of this matter.

Meanwhile, a former branch manager in Vancouver has been accused by the MFDA of altering dozens of forms, including many to process transactions.

Sylvia Suk Fan Wong, who used to be registered as dealer with Investia Financial Services, previously held senior positions at other firms, including branch manager and compliance officer.

She is accused of altering 26 account forms in respect of 17 clients and using these to process transactions. The second allegation is that the respondent obtained 12 pre-signed account forms in respect of six clients and used these to process transactions.

The first hearing is on August 28.


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